capitalism is an economic system in which the free market alone controls the production of goods and services. its key features include open competition, the profit motive of producers and private ownership of property. capitalism stands in direct contrast to government controlled economies where production and prices are set by a central decision making body. as a system based on free markets, the prices of various goods are negotiated between the buyer and seller. because producers have an incentive to maximize profit, they turn to provide items that are relatively scarce and therefore attract a higher price. economist adam smith argued that this profit motive actually benefit its society at large. he compared free markets to an invisible hand, pushing producers to its goods and services for which there is greatest need. ?, a farmer, initially ? plant corn ?, but ? supply around the world has lower prices. instead, he decides to plant soybeans which are more profitable because of a smaller supply relative to demand. if too many producers make the same decision as ?, the free market will correct itself. soybean prices will go down and farmers will choose to focus on other crop or perhaps go into another line of work altogether. advocates of capitalism believe this system is significantly more efficient than a centrally controlled economy. however, critics suggest that it can also lead to wealth ? concentrated in a relatively small segment of population to ? of other groups. in reality, a purely capitalism system is hard to find. even in the united states, for example, the government subsidizes certain industries for social and political reasons, but in most transactions the only thing controlling the price is the consumer's willingness to buy.