Definition (1):
A private enterprise system is an economic system that rewards firms for their ability to identify and serve the needs and demands of customers. This system minimizes government interference in economic activity.
Definition (2):
A private enterprise system is an economic system where both the resources necessary for production and the business are owned by private individuals, not by public institutions like the government.
A private enterprise system is based on the following four principle or rights:
The right to private property: In the private enterprise system individuals have the right to buy, own, use, and sell the property as they see fit. This right of ownership includes land, buildings, equipment, and intangible property such as inventions.
The right to freedom of choice: The private enterprise system also provides the right to freedom of choice. This freedom of choice applies to the individual right to decide what type of work to do, where to work, and how and where the money is to be spent. This means that people can work for others or work for themselves if they so choose. It also means that a person is free to change jobs and work to improve his or her economic position in life.
The right of profit: In the private enterprise system, the person who takes the chance in starting the business by investing is guaranteed the right to all profits. This right is to what attracts people to begin a business, and it is the ultimate goal of a business.
The right to compete: Under the private enterprise system people have the freedom to compete with others. Competition, along with profits, is the cornerstone of the private enterprise system. Companies compete by developing better products, altering prices, developing unique advertising programs, and having the product or service where and when the consumer wants it. The benefit to the consumer: competition makes for better products and more responsiveness to consumer needs.