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A market economy is an economic system where the production and distribution of goods and services are determined by the forces of supply and demand1. This means that the decisions about what to produce, how to produce it, and for whom it is produced are made by the interactions between consumers and businesses, rather than by a central government. In a market economy, prices serve as signals to both producers and consumers, guiding them to allocate resources efficiently1.
Key characteristics of a market economy include:
- Property rights: Individuals and businesses have the right to own and use property as they see fit.
- Supply and demand: Prices and the quantities of goods and services are determined by the interaction of supply and demand.
The United States is an example of a market economy, where market forces are the primary driver of economic activity, with some government intervention to provide stability1. Economists generally agree that market-oriented economies tend to produce better economic outcomes, although there is debate over the exact balance between market freedom and government planning1.
Learn more:✕This summary was generated using AI based on multiple online sources. To view the original source information, use the "Learn more" links.www.investopedia.com/terms/m/marketeconomy.aspen.wikipedia.org/wiki/Market_economywww.merriam-webster.com/dictionary/market%20e…www.dictionary.com/browse/market-economywww.nationalgeographic.org/encyclopedia/market-…en.wikipedia.org/wiki/Market_economyMarket economy - Wikipedia
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