What are the important features of a capitalist economy?
The important features of a capitalist economy are as follows:
There is private ownership of means of production. The means of production such as land and capital are owned by private individuals or enterprises. Production takes place for selling the output in the market rather than for self-consumption.
There is sale and purchase of labour services at a price which is called the wage rate. Entrepreneurs hire wage labour from the market along with capital and land services to carry out production.
The entrepreneur is at the helm of affairs in a firm. She exercises control over major decisions and bears the risks and uncertainties. Her motive for producing goods and services is to sell them in the market and earn profits.
Explanation
The textbook explicitly lists the characteristics of a capitalist economy: (a) private ownership of means of production, (b) production for selling output in the market, and (c) sale and purchase of labour services at the wage rate. Additionally, the context explains the role of entrepreneurs who control decisions, bear risks, and produce with the profit motive. This distinguishes capitalist economies from peasant or tribal societies where production is often for self-consumption and wage labour is seldom used.