Final answer:
Capitalism is an economic system where private ownership, profit pursuit, and market competition prevail, allowing individuals to invest in businesses and receive profits.
Step-by-step explanation:
The economic system described, built around the private ownership of the means of production, the pursuit of profit, and market competition is known as capitalism. This system enables private enterprise, where individuals or groups own and operate businesses. In a capitalist economy, concepts such as scarcity, which denotes the situation where demand for goods and services exceeds the supply, and specialization, meaning individuals or firms focus on tasks they're well-suited for, are key elements. Under capitalism, individuals have economic freedom to invest and seek profits, and the market is characterized by competition and voluntary exchange.
For example, if people decide to invest money into a company, they are entitled to profits from the company's sales, assuming the business is successful. Such a system encourages innovation and efficiency driven by the motivation to earn profit and reinvest in various sectors of the economy.