In which type of economic system are the major factors of production (land, labour, capital and enterprise) primarily owned and controlled by private individuals and firms?

Introduction / Context:
Economic systems can be classified according to who owns and controls the factors of production such as land, labour, capital and enterprise. Different systems allocate decision making power between private individuals and the state in different ways. This question asks which type of economy is characterised by individual or private ownership of the major factors of production.

Given Data / Assumptions:

• Factors of production include land, labour, capital and entrepreneurship.
• We are asked about systems where these are owned individually or privately.
• Options list capitalist, socialist and mixed economies.
• We assume standard textbook definitions of these systems.

Concept / Approach:
In a capitalist economy (also called a market economy or free enterprise system), the means of production are mainly owned by private individuals and firms. Decisions about what to produce, how to produce and for whom to produce are largely guided by market prices and profit motives. In a socialist economy, the state or community typically owns and controls the major means of production, and central planning plays a key role. A mixed economy combines elements of both, with both private and public ownership. Therefore, the system most clearly associated with individual ownership of factors is the capitalist economy.

Step-by-Step Solution:
Step 1: Recall that private or individual ownership of productive resources is a defining feature of capitalism. Step 2: Recognise that in socialist systems, ownership is usually collective or state based, not individual. Step 3: Understand that mixed economies have a blend of private and public ownership, so they cannot be described as exclusively individually owned. Step 4: Select “Capitalist economy” as the type where factors of production are owned individually.

Verification / Alternative check:
Think of typical examples: the United States or other Western market economies are often described as capitalist, with private businesses owning factories, machinery and land. In contrast, historically socialist economies like the former Soviet Union or some other planned economies placed most productive assets under state ownership. Mixed economies like India have substantial public sector enterprises alongside private businesses. These examples reinforce that individual ownership of factors is most closely associated with a capitalist economy.

Why Other Options Are Wrong:
Socialist economy: In a socialist system, the means of production are commonly owned by the state or community, and individual ownership of major factors of production is limited or absent.
Mixed economy: Although mixed economies allow private ownership, they also have significant state ownership and control in key sectors, so it is not correct to say factors are owned individually in the same exclusive way as in capitalism.
Both capitalist and socialist economies: This is incorrect because socialist economies fundamentally differ from capitalist economies in their emphasis on collective or state ownership rather than individual ownership.

Common Pitfalls:
Learners sometimes confuse mixed economies with purely capitalist systems because they observe private businesses but forget the role of the state. Another pitfall is to focus only on market mechanisms and ignore the underlying ownership structure. For exam purposes, it is crucial to remember that individual ownership of factors is the hallmark of capitalism, while socialism emphasises collective or state ownership, and mixed economies combine elements of both.

Final Answer:
An economy in which the factors of production are owned individually is a capitalist economy.