Written by the Fiveable Content Team • Last updated September 2025
Verified for the 2026 exam
Verified for the 2026 exam•Written by the Fiveable Content Team • Last updated September 2025
Definition
A market economy is an economic system where most economic decisions are made by individuals and businesses based on supply and demand without significant government intervention.
Related terms
Supply and demand: The relationship between the availability of a product or service (supply) and the desire or need for that product or service (demand).
Free enterprise: An economic system where private individuals or businesses have the freedom to operate for profit with limited government interference.
Competition: The rivalry among sellers in a market economy, which leads to better products, lower prices, and innovation.