Question

1. The competitive capitalist market model is frequently used as a standard by which both the theory and application of various economic systems are judged. This role is due largely to the theoretically appealing nature of capitalist notions of Pareto efficiency. 1 page

Answer 1

The Competitive Capitalist Market Model :- In a Capitalist market economy, decision making and investment are fixed by every owner of wealth, property or production ability in financial and capital markets.
Capitalism is an economic system in which individuals or businesses have capital goods and services is set on supply and demand in the general market and this is known as a market economy or planned economy.
There are five important characteristics of capitalism,
1. economic freedom,
2. voluntary exchange,
3. private property rights,
4. competition,
Pareto Efficiency:- It is economic state where resources cannot be make one individual better without making at least one individual disagreeable off. It exists only in theory though the economy can move onward to Pareto efficiency. In perfect competition and all resources were used to their largest efficient capacity, then everyone would be at their Pareto efficiency. Economists Kenneth Arrow, and Gerrard Debreu displayed theoretically that under the assumption of perfect competition and where all goods and services are tradable in competitive markets with zero transactions costs an economy will tend toward Pareto efficiency.