Definition & Characteristics
- A market economy is an economy that has no government intervention in the allocation of resources & distribution of goods/services
- This is also called a free market economy
- There is no purely free market economy in the world but some countries have less government intervention than others
- An economy can be considered to be a market, mixed or planned economy
- The type of economy is determined by how the three economic questions are answered (see: 2.2.1 The (Free) Market System).
- This ultimately determines the amount of government intervention in an economy
- The type of economy is determined by how the three economic questions are answered (see: 2.2.1 The (Free) Market System).
The spectrum of economic systems & where certain economies fall based on the degree of government intervention
- North Korea is a planned economy
- The United States, Japan & Singapore are mixed economies but have less government intervention than Norway, Germany or China
Characteristics of a Market System
Characteristic |
Explanation |
Property Ownership |
|
Freedom of Choice |
|
Self Interest |
|
Limited Government Intervention |
|
Price Mechanism |
|