In economics, capitalism is a system that relies mainly on private ownership and markets to allocate resources.
Under capitalism, individuals and privately owned firms generally control productive assets such as businesses, land, and equipment. Prices are formed largely through interactions between buyers and sellers, while the prospect of profit can guide investment and production. Competition may encourage firms to reduce costs, develop products, or attract customers.
Capitalist economies differ greatly in practice. Most modern countries combine private markets with government taxation, regulation, public services, and ownership of selected industries. For this reason, “capitalism” does not describe a single unchanging model or imply that every resource is privately owned.
The term is often contrasted with socialism, although real economies commonly contain elements of both market allocation and government direction. Capitalism also differs from mercantilism, an earlier system associated with strong state management of trade and colonial commerce. Debates about capitalism frequently concern inequality, market power, labor conditions, and the appropriate role of government.