Introduction to Business EconomicsMTP Apr 21Question 562 of 209
All Questions

Which of the following is not a demerit of Capitalism?

Options

AThe pattern of demand does not represent the real need of the society.
BStrikes and lockdown are very common under capitalism
CCapitalism usually functions in a democratic framework.
DNone of these
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Correct Answer

✅ Option c — Capitalism usually functions in a democratic framework.

All Options:

  • AThe pattern of demand does not represent the real need of the society.
  • BStrikes and lockdown are very common under capitalism
  • CCapitalism usually functions in a democratic framework.
  • DNone of these

Detailed Solution & Explanation

• The question asks to identify which statement is NOT a demerit (disadvantage) of Capitalism. We need to find the option that describes a positive aspect or a neutral characteristic, rather than a negative one. • Let's analyze each option: • (A) The pattern of demand does not represent the real need of the society: This is a demerit. In capitalism, production is guided by profit motives and effective demand (demand backed by purchasing power), not necessarily by societal needs. For example, luxury goods might be produced in abundance while essential services for the poor are neglected. This leads to misallocation of resources from a societal perspective. • (B) Strikes and lockouts are very common under capitalism: This is also a demerit. Capitalism often involves conflicts between labor (seeking higher wages/better conditions) and capital (seeking higher profits), leading to industrial unrest like strikes and lockouts, which disrupt production and cause economic losses. • (C) Capitalism usually functions in a democratic framework: This statement describes a common characteristic or even a potential advantage, not a demerit. While capitalism can exist under various political systems, it often thrives and is associated with democratic societies, where individual freedoms and property rights are protected. This is generally seen as a positive correlation, not a disadvantage of the economic system itself. Therefore, this is not a demerit. • Since option (C) describes a characteristic that is not a disadvantage, it is the correct answer. The other options describe genuine demerits of a capitalist system.

About This Chapter: Introduction to Business Economics

Paper

Paper 4: Business Economics

Weightage

5%

Key Topics

Meaning, Scope, Price Mechanism

This chapter lays the groundwork for understanding Business Economics as a discipline. It covers the meaning, scope, and nature of economics — including key distinctions like Microeconomics vs Macroeconomics, Positive vs Normative economics, and the fundamental economic problem of scarcity. Students learn how businesses use economic principles for decision-making in a competitive marketplace.

View Official ICAI Syllabus

Exam Strategy Tip

Focus on definitions and distinctions between concepts. Questions often test whether you understand the difference between Micro and Macro, or Positive and Normative statements.

Related Comparison Tables

Microeconomics vs Macroeconomics: The Complete CA Foundation GuidePositive vs Normative Economics: Fact vs Opinion

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