People often use the terms free enterprise, free market, or capitalism to describe the economic system of the United States. A free enterprise economy has five important characteristics. They are: economic freedom, voluntary (willing) exchange, private property rights, the profit motive, and competition.
Right to Private Property: This is the essence of capitalism. This right means that private property such as property, factories, machines, plants etc. can be owned under private individuals and companies.
Price Mechanism: Price mechanism is like an invisible hand that controls the workings of a capitalist economy.
Profit Motive: The driving force behind any capitalist economy is the profit motive. All companies wish to produce and sell their products to maximize their profits. This also induces healthy competition in the economy.
Freedom of Enterprise: In capitalism, every individual is free to make his own economic choices without any intervention. This includes both the consumer and the producers. So a producer is free to produce any goods or services.
