What defines capitalism as an economic system?

Capitalism is defined by private ownership of the means of production, where individuals or businesses own resources and operate them for profit. This private ownership structure incentivizes innovation and competition, as individuals and companies strive to improve their products and reduce costs to attract consumers. In a capitalist system, the market largely dictates the allocation of resources based on supply and demand, allowing for the potential for wealth accumulation and economic growth.

The emphasis on profit also plays a crucial role in driving economic activity within capitalism. It encourages investment, entrepreneurship, and risk-taking, which are essential features that distinguish capitalism from other economic systems like socialism or communism, where production resources would be collectively owned or controlled by the government for the benefit of all citizens.