Differentiate between capitalism, socialism and mixed economy. Ans. Difference between capitalism, socialism and mixed economy:

Capitalism

Socialism

Mixed Economy

1. In capitalism only private sector exists.

2. The aim of production is to earn maximum profit

3. In capitalism, only those consumer goods are produced which are in demand i.e. goods that can be sold profitably either in the domestic or in the foreign markets.

4. The role of government in the capitalist economy is very limited.

5. In capitalist economy central problem of an economy (what, how, for whom to produce) are solved by the forces of demand and supply in the market.

In socialism only public sector exists. The aim of production is maximum social welfare

In socialist economy, the government produced those goods which are needed by society.

In socialist economy, the government has full control on the economy.

In socialism, decisions related to what, how and for whom to produce are taken by some central authority appointed by the government of the country.

In mixed economy public sector and private sector co-exists.

The aim of production is to earn fair profit with social welfare.

In the mixed economy, the private sector will produce those goods and services which it can produce will and the government will provide essential goods and services which the private sector fails to do.

Government has full control in public sector and limited control in private sector. In this economy, the decisions relating to what, how and for whom to produce are taken on the basis of market forces as well as on the basis of social considerations.