Capitalism is a form of economic and political system. Private owners (the people) control the country's trade and industry not the government. For example if you owned the only mango tree in Manila, you can set the price for how much you want to sell each mango. You could trade your mangoes for services (shoes, clothes, a home). Since you owned the only mango tree, you get to decide what they are worth. Capitalsim works best when someone else gets a mango tree. Now, you can not sell your mangoes very high because there is competition. Competition drives prices down. The government job in capitalism is to make sure you and someone else dont work together to keep prices high.
The problems with capitalism is that rich people or big business can try and get rid of competition. A big company that has a 1000 mango trees can sell their product cheaper than you can with your one tree. So if you start to go out of business they can buy your tree. The government sometimes has to step in and set limits on how much you can charge, how many trees you can own, and make sure everybody gets a chance to buy your mangoes.
As far as the enviornment, capitalism can effect if good or bad. A company or wealthy person can use their money and political influence to protect the environment. But some other business or private owners can also get laws passed that allow them to make more profit while polluting the water or destroy wildlife habitations.