Market Economy
Definition
A market economy is an economic system in which the production and distribution of goods and services are determined by the laws of supply and demand. It relies on competition, private ownership, and individual decision-making.
Analogy
Imagine a school cafeteria where students can buy snacks from various vendors. Each vendor sets their own prices based on what they think students will pay. The popularity of each snack determines how much the vendors produce. This is similar to a market economy because prices and production are determined by consumers' choices.
Related terms
Industrial Revolution: The period of rapid industrialization that transformed economies from agrarian to manufacturing-based, greatly expanding trade opportunities in the North.
Capitalism: An economic system based on private ownership, where individuals or businesses operate for profit.
Entrepreneurship: The act of creating and running a business venture, taking risks in pursuit of potential profits.
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