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A market economy is an economy in which decisions regarding investment, production, and distribution are based on supply and demand,<ref>{{#invoke:citation/CS1|citation |CitationClass=book }}</ref> and prices of goods and services are determined in a free price system.<ref>{{#invoke:citation/CS1|citation |CitationClass=book }}</ref> The major defining characteristic of a market economy is that investment decisions and the allocation of producer goods are mainly made by negotiation through markets.<ref name="auburn.edu">{{#invoke:citation/CS1|citation |CitationClass=web }}</ref> This is contrasted with a planned economy, where investment and production decisions are embodied in a plan of production.

Market economies can range from hypothetical laissez-faire and free market variants to regulated markets and interventionist variants. In reality, market economies do not exist in pure form, since societies and governments regulate them to varying degrees.<ref>{{#invoke:citation/CS1|citation |CitationClass=book }}</ref><ref>Tucker, Irvin B. p 491. Macroeconomics for Today. West Publishing. p. 491</ref> Different perspectives exist as to how strong a role the government should have in both guiding the market economy and addressing the inequalities the market produces. Most existing market economies include a degree of economic planning or state-directed activity, and are thus classified as mixed economies. The term free-market economy is sometimes used synonymously with market economy, but it may also refer to laissez-faire or free-market anarchism.<ref>"market economy", Merriam-Webster Unabridged Dictionary</ref>

Market economies do not logically presuppose the existence of private property in the means of production. A market economy can consist of various types of cooperatives, collectives or autonomous state agencies that acquire and exchange capital goods in capital markets, utilizing a free price system to allocate capital goods and labor.<ref name="auburn.edu"/> There are many variations of market socialism, some of which involve employee-owned enterprises based on self-management; as well as models that involve public ownership of the means of production where capital goods are allocated through markets.<ref>{{#invoke:citation/CS1|citation |CitationClass=book }}</ref>


Market economy sections
Intro   Capitalism    Market socialism    Early market economies    Criticisms   See also  References  

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