Features of a Capitalist Economy

Vocabulary flashcards reviewing the key concepts and features of a capitalist economic system, including core principles such as private property, price mechanism, profit motive, and market competition.

Capitalist Economy

An economic system in which private individuals own the means of production and economic decisions are driven by market forces and the profit motive.

Right to Private Property

The legal right of individuals to acquire, own, use, and inherit property; considered the essence of capitalism.

Price Mechanism

The interaction of demand and supply that determines prices and allocates resources, often called the economy’s “invisible hand.”

Profit Motive

The desire for financial gain that drives producers to undertake economic activities in a capitalist system.

Freedom of Enterprise

The liberty of consumers and producers to make their own economic choices and use resources without state intervention.

Competition

Rivalry among producers in product markets and among resource owners in factor markets, characteristic of capitalism.

Demand

The quantity of a good or service that consumers are willing and able to buy at various prices.

Supply

The quantity of a good or service that producers are willing and able to offer for sale at various prices.

Scarcity

The fundamental economic problem of limited resources in the face of unlimited human wants.

Market Forces

Collective term for demand and supply, which together shape prices and output in a market economy.

Invisible Hand

A metaphor introduced by Adam Smith describing how individual self-interest in a free market can unintentionally promote the overall economic good.