What characterizes capitalism as an economic system?

Capitalism is characterized by private ownership of capital, which means that individuals and businesses have the right to own and control resources and means of production. In a capitalist economy, the decisions regarding the production, distribution, and prices of goods and services are primarily driven by the free market and the competition between private enterprises. This mechanism allows for innovation, efficiency, and investment, as owners can seek profits and make decisions according to their interests.

Contrasting options highlight different economic systems: government control of production describes a command economy, collective ownership aligns more closely with socialism where resources are owned and managed by the community or state, while fixed pricing suggests a regulated system, which may occur in markets with limited competition or government intervention. Thus, the emphasis on private ownership is what fundamentally distinguishes capitalism from these other economic frameworks.