The market economy is a type of economic system in which economic decisions and prices are determined by market forces rather than by a centralized institution like state. The market forces here refers to the collective influence of all the decisions that are taken by individual participants; both buyers and sellers, in the economy. The market decisions are made by the free will of businesses and consumers. A market economy is the opposite of a planned economy which is based upon centralized decision making. This institution could be a government or military.
ADVANTAGES OF MARKET ECONOMY
Market economies are proved to be good for economic growth because people have the choice to make economic decisions on both the business and consumer side. One of the greatest perks of a market economy is that people are free and encourages setting up a business which enhances the investment side of the GDP. Increased investment means growing GDP. Market economies take care of the will and right of firms and consumers as well. People are free to choose for themselves. There is no centralized institution that decides for other institutions of society. Instead, people are the rulers of the economy. Everyone in society gets equal right towards economic participation to improve their standard of living.