How is capitalism defined?

Capitalism is defined as an economic system that emphasizes private ownership of the means of production and the pursuit of profit. In a capitalist system, individuals or companies own resources and businesses, allowing them to make decisions regarding production, pricing, and trade on the basis of what will maximize their financial returns. This system is characterized by free markets where competition is encouraged, thus fostering innovation and efficiency.

The focus on profit incentivizes producers to respond to consumer demands and preferences, leading to a dynamic marketplace. Furthermore, capitalism typically involves minimal government intervention in economic activities, allowing market forces to guide the economy. This is distinct from systems where ownership is controlled by the state or the community, which would not fit the definition of capitalism.