An example of the way a market economy works is how new technology is priced very high when it is first available for purchase, but the price goes down when more of that technology becomes available. This kind of price fluctuation is a central component of a market economy. That is, supply and demand dictates prices.Continue Reading
There are several characteristics unique to market economies. First, there is no governmental control. The purchasing and trading on the free market is completely controlled by supply and demand. There are no price controls or regulation of industry monopolies. Second, most goods and services are available through privately owned businesses. Consequently, self-interest plays a major role in the market. This means privately owned businesses focus on producing a good for the least amount of money while gaining the maximum amount of money possible on the free market.
No industrialized countries have a true market economy. Instead, most industrialized countries have a mixed economy that is similar to a market economy, but with varying levels of governmental regulation. The United States is considered to have a mixed economy, with some of the characteristics of a market economy, but with a moderate level of governmental control. For example, the government regulates mergers in the television and Internet provider industry to prevent monopolies. Additionally, there are some laws that set price controls, such as laws protecting against price spikes during natural disasters.Learn more about Economics