The economic system based on agriculture and land ownership in medieval Europe is known as feudalism. This hierarchical structure was characterized by the relationship between lords, who owned large estates, and vassals or serfs, who worked the land in exchange for protection and certain rights. Land was the principal source of wealth and power, with social classes defined by land ownership and labor. Feudalism shaped medieval society, influencing political, economic, and military structures, ultimately leading to the development of towns and the decline of the feudal system as commerce flourished in later centuries.