According to basic economic classification, capitalism falls under which type of economic system that relies mainly on price signals and market forces to allocate resources and determine prices?

Introduction / Context:
In introductory economics, one common way to classify economic systems is to see who takes the key decisions about production, consumption, and pricing. The term capitalism is widely used in textbooks, exams, and public discussions, so students should clearly understand which broad category of economic system it belongs to. This question checks whether you can correctly connect the term capitalism with the correct type of economic system based on its core features.

Given Data / Assumptions:

• The question is about the nature of capitalism as an economic system.
• We are asked to identify the broad category of economic system under which capitalism falls.
• Options include market, planned, command, and mixed systems.
• We assume standard definitions used in economics textbooks.

Concept / Approach:
In a market economic system, most decisions on what to produce, how to produce, and for whom to produce are guided by demand and supply forces operating through markets. Prices play a key role in signaling scarcity and preferences. Capitalism is typically described as a system where resources are largely privately owned, firms operate for profit, and markets play the dominant coordinating role. In contrast, a command or planned system relies heavily on state planning. A mixed system combines elements of both market and state control.

Step-by-Step Solution:
Step 1: Recall the definition of capitalism. It is an economic system with private ownership of resources, profit motive, and reliance on markets.Step 2: Recall what a market economic system means. It is a system where prices and market forces coordinate economic activity.Step 3: Compare this with planned or command systems, where the government makes most production and allocation decisions.Step 4: Observe that capitalism matches the features of a market system, not a fully planned or command system.Step 5: Therefore, capitalism falls mainly under the market economic system category.

Verification / Alternative check:
You can verify this by looking at examples of capitalist economies such as the United States or many Western economies where markets, competition, and private enterprises dominate. These economies are typically called market economies or capitalist economies, which confirms that capitalism and the market system go together in standard terminology.

Why Other Options Are Wrong:
Planned: In a planned or command system, the government centrally plans output and allocation, which is different from the private, market driven nature of capitalism.
Command: A command system is an extreme form of central planning in which the state directs most activity, which again does not describe capitalism.
Mixed: A mixed economy has both strong government and strong market roles. While many capitalist countries are mixed in practice, the pure concept of capitalism is most closely aligned with the market system rather than the mixed category used in exam classification.

Common Pitfalls:
Students sometimes confuse mixed economies like India with the idea of capitalism and assume that capitalism must mean mixed economy. Others think that any government regulation makes it a planned system. For exam purposes, focus on the dominant coordinating mechanism: in capitalism it is the market, so market is the correct classification here.

Final Answer:
Capitalism falls under the market economic system.