Is the United States Capitalist?

Jason Mack, James Walsh
  • Author
    Jason Mack

    Dr. Jason Mack is a professor of psychology, educational leadership, statistics, higher education, research and has participated in several research committees. He holds a Doctorate of Industrial/Organizational Psychology and Organizational Leadership, with a Specialization in Educational Leadership. He also holds a Master's degree in Education specializing in Teaching and Learning with Technology. He also has a Bachelor of Arts in English. He has a 120 Teaching English as a Second Language Certificate from myTefl. He is bilingual in Spanish and also has several certificates in Blockchain management and programing from Ivan on Tech Blockchain Academy. He has taught English as a Second Language for two years online to students in many different countries all over the world.

  • Instructor
    James Walsh

    M.B.A. Veteran Business and Economics teacher at a number of community colleges and in the for profit sector.

What makes the US economic system capitalist or socialist? Learn about the definition of a mixed economy and the basic principles of free enterprise. Updated: 10/07/2021

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Is the US Capitalist?

The US has a mixed economy; therefore, both principles of capitalism and socialism are present within the US economic system. Capitalism is when the economy has the opportunity to function based on supply and demand with little to no government regulation. Socialism is when the government regulates industries. When the government regulates and controls the economy one hundred percent, this is a command economy. The US has a blend of both capitalism and socialism making it a mixed economy.

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  • 0:04 Capitalism
  • 0:42 Freedom of Choice
  • 1:33 Open & Free Markets
  • 3:17 Property Rights
  • 3:56 Limited Government
  • 5:09 Lesson Summary
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Principles of Capitalism

The principles of capitalism include both capitalists and capital available. Capital is defined as the workers' production. The term capitalist refers to those that control the capital, generally individuals that run or own businesses.

The basic principles of free enterprise are the right to own property, engaging in mutually agreed-upon contracts, and allowing supply and demand to dictate prices. The dictation of prices can be negotiated between consumers and business owners when supply and demand influence pricing. If a business owner sets the price too high in a capitalist market, the consumers will not purchase the product or service. This behavior by consumers within a free enterprise can drive down the price of the good or service. Consumers have the ability to also drive up prices with their collective buying behavior.

Collective consumer behavior can drive up or drive down prices in a mixed economy

a picture of someone making an online purchase with their Mastercard in hand alongside a computer

The type of economy is influenced by who controls capital and the means of production. In a capitalist market, it is private individuals that own businesses. In a command economy, it is the government that owns businesses. In a command economy, the government is one hundred percent in charge of goods and services. There is no individual or corporate ownership in a command economy. The government is also responsible for the prices in a command economy. Additionally, in a command economy, the government controls the supply, and means of production. The goal in a command economy is to produce exactly the same amount of supply as the demand for the supply. There is no competition between different companies in a command economy because the government owns all businesses, goods, and services. The US economic system has a balance between primarily privately owned businesses along with a few industries that are government-controlled, making it a mixed economy.

Freedom of Choice

In the US economic system, consumers have the freedom of choice. This means that consumers may purchase goods and services from wherever they want. For example, an individual has the opportunity to purchase whatever car or smartphone brand that he or she chooses. Freedom of choice is also driven by US citizens' using the same currency to purchase goods and services.

Consumer sovereignty is the effect that consumers have with their freedom of choice over the economic system. If a large group of consumers does not believe in a product, they have the right to not purchase that product and may cause a significant decline in sales. For example, if a company declares that it only supports green energy, but is later found to be using non-green energy, consumer sovereignty could potentially put the company out of business. Consumer sovereignty in this example would manifest if many consumers collectively chose not to purchase the product.

Open and Free Markets

The US has a mixed economy because it has components of both a free market economy and a command economy. There are many principles that govern a free market economy. Some of the most well-known principles are competition, supply, and demand. Competition refers to the different companies that offer similar goods or services. When there is a lot of competition, the prices are often driven down because consumers usually like to find the best price and functionality. For example, there are many different types of flat-screen TVs, and they compete with each other to offer the best prices, features, and benefits. Because of the competition in the television market, it is usually possible to find an affordable flat-screen TV. If flat-screen TVs were only made by one brand, then the company could sell their TVs for a higher price.

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Frequently Asked Questions

Why is USA a mixed economy?

The USA is a mixed economy because although capitalism with private ownership is widely available for many industries, it is not available for all industries. There are still industries and regulations imposed by the government which make the USA a mixed economy, rather than a free market economy.

Is the US a market economy?

The US is a mixed economy. It has components of both capitalism and socialism. In capitalism, individuals and companies control the market with little to no government regulation. In socialism, the government controls the market.

Is the US socialist or capitalist?

The US has a mixed economy. A mixed economy has components of both capitalism and socialism. Because there is less government regulation than a command economy would have, the US is more capitalist. However, there are components of socialism in the US economy because of the government regulation on minimum wage, businesses, tariffs, and government-funded healthcare.

What are types of economy?

There is a free-market economy, where there is no government regulation. Individuals and businesses control the market. Also, capitalism and supply and demand rules influence the market.

There is a mixed economy which is a blend of both capitalism and socialism.

There is a command economy, where the economy is completely run by the government.

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