tutorial 8.docx - COMM101 Principles of Responsible Business(Tutorial Submissions Name Gayle Lim Jin Yuen(UOW ID 6654927 Tutorial Group W4 1 What are

tutorial 8.docx - COMM101 Principles of Responsible...

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COMM101: Principles of Responsible Business (Tutorial Submissions) Name: Gayle Lim Jin Yuen (UOW ID: 6654927) Tutorial Group: W4 1. What are the key features of Capitalism? 2. Identify and explain arguments for and against Capitalism. Capitalism is defined as ‘an economic system where most means of production and distribution are privately owned, operating under a profit or market system’ (Encyclopedia Britannica, 2019). There are four key features of capitalism, namely companies, profit motive, competition, and private property. Companies, or corporations, are a legal and separate entity from its shareholders and employees (Beattie et al, 2018, p. 37). A company can buy, sell and own property, enter contracts as well as subject to laws as any other individual (Peavler, 2019). This means they can sue others and be sued. Corporations also have unlimited life, which means it will continue operating unless it is formally dissolved; the existence of a corporation is thus independent of the lives of its stakeholders (Hui, 2018). According to Hui (2018), an advantage of the company is that shareholders have limited liability for the debts and other obligations of the company; legally, this means shareholders’ losses are limited to the original amount they invested into the company and their personal assets cannot be taken to satisfy the debts or obligations of the company. An example of a company existing as a separate entity from its shareholders is Lyft, an on-demand transportation company in America, which is being sued by fourteen women who claim to be assaulted by Lyft drivers (Hutson, 2019). However, they are suing the company but not Lyft’s CEO and co-founder, Logan Green (Bort, 2019). The next key feature in capitalist system is profit motive. It is what motivates all companies when they make and sell goods and services, which is the self-interest to earn profits (Zucchi, 2019). As explained by Adam Smith (2007), “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner but from their regard to their own interest.” This would mean that businesses and companies are not selling things to be nice, but to earn money from it. Competition is also an important feature in capitalism. It is argued by Smith that it is essential to have competition in the economy, because all companies are acting in their own self-interest to maximize profits (Barry, 2016). However, it is then unavoidable that companies within the same industry will compete with one another for the same pool of customers (Gartenstein, 2018). Thus, competition acts a check on self- interest, because there will always be other self-interested people competing in the market (Federal Reserve Bank of St. Louis, 2012). Furthermore, competition keeps prices down because companies must use their resources efficiently (Bhasin, 2018), knowing that customers have the option to choose between different suppliers of a similar product.
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