What Is a Private Enterprise System?

A private enterprise system is the foundation of free market capitalism; it involves open markets and competition and is led by private individuals seeking profit. In private enterprise, the government and its agencies do not control businesses or profitability.

In a private enterprise system, individuals have the freedom to produce, sell and buy at will. This system, also referred to as capitalism, allows anyone with an idea and the required financing to start his or her own business. The success of the system depends on the effectiveness of businesses in addressing consumer demand. With private enterprise, prices fluctuate depending on supply and demand, and increased demand leads to business creation and expansion.