Q:

Who makes economic decisions in a market economy?

A:

Quick Answer

It is the people who make decisions in a modern-day market economy. This is the case because decisions about production, investment and distribution are based on the rules of supply and demand. The prices of goods and services are then determined in a free price system.

Continue Reading

Full Answer

The people factor plays a major role in the market economy since they are the pivot of decision making. Any decisions on investments and allocation of goods are made through markets that cannot function without customers who need the goods. People have the power to decide whether to buy or not buy the products and services that are on offer in the market. Their purchasing power plays a major role in this type of an economy.

In most parts of the world, market economies don’t exist in a pure form. This is because governments and societies regulate them. That is why most of these economies today include a certain degree of economic planning or state-planned activities. There are some cases where the market economy can double up as a mixed economy. In all these cases, the success of the economy rests in the purchasing willingness of buyers and availability of the right suppliers.

Learn more about Economics

Related Questions

Explore