Market economy what Is a Market Economy?

Characteristics 
Property rights 
For market economies to function efficiently, governments must establish clearly defined and enforceable property rights for 
assets and capital goods. However, property rights does not specifically mean private property rights and market economies do 
not logically presuppose the existence of private ownership of the means of production. Market economies can and often do 
include various types of cooperatives or autonomous state-owned enterprises that acquire capital goods and raw materials in 
capital markets. These enterprises utilize a market-determined free price system to allocate capital goods and labor.
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 In addition, 
there are many variations of market socialism where the majority of capital assets are socially owned with markets allocating 
resources between socially owned firms. These models range from systems based on employee-owned enterprises based on self-
management to a combination of public ownership of the means of production with factor markets.
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Supply and demand 
Market economies rely upon a price system to signal market actors to adjust production and investment. Price formation relies on 
the interaction of supply and demand to reach or approximate an equilibrium where unit price for a particular good or service is 
at a point where the quantity demanded equals the quantity supplied.
Governments can intervene by establishing price ceilings or price floors in specific markets (such as minimum wage laws in the 
labor market), or use fiscal policy to discourage certain consumer behavior or to address market externalities generated by certain 
transactions (Pigovian taxes). Different perspectives exist on the role of government in both regulating and guiding market 
economies and in addressing social inequalities produced by markets. Fundamentally, a market economy requires that a price 
system affected by supply and demand exists as the primary mechanism for allocating resources irrespective of the level of 
regulation.