Which term describes the economic system where individual choice and voluntary exchange direct economic decisions?

The term that best describes the economic system where individual choice and voluntary exchange direct economic decisions is capitalism. In capitalism, the means of production are largely privately owned, and individuals have the freedom to make decisions about their businesses, investments, and consumption based on their own interests and the forces of supply and demand. This system encourages competition and innovation, allowing for the allocation of resources according to what buyers want and what sellers are willing to offer.

In capitalism, individuals can engage freely in trade and economic activities, leading to the creation of wealth and development of economies. The reliance on market mechanisms facilitates efficient resource distribution, as prices are determined by the interactions of buyers and sellers, which reflect the preferences and needs of consumers.

The other terms listed involve different economic principles. Socialism emphasizes collective ownership and governmental control over production and resources, which limits individual choice. Feudalism represents a system based on land ownership and a rigid class structure, showing limited economic mobility or personal choice. Democratic socialism includes aspects of both socialism and democracy, advocating for political democracy alongside social ownership, but still does not center on individual choice to the same extent as capitalism does.

Thus, capitalism is the best term to describe an economic system focused on individual choices and voluntary exchanges.