Capitalist countries

A market economy is an economic system in which the decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

Market economies range from minimally regulated “free market” systems to interventionist forms, where the government plays an active role in correcting market failures and promoting social welfare. State-directed or dirigist economies are those, where the state plays a directive role in guiding the overall development of the market through industrial policies or indicative planning — which guides but does not substitute the market for economic planning — a form sometimes referred to as a mixed economy.

Market economies are contrasted with planned economies where investment and production decisions are embodied in an integrated economy-wide economic plan by a single organizational body that owns and operates the economy’s means of production.

Market economies rely upon a price system to signal market actors to adjust production and investment. Price formation relies on the interaction of supply and demand to reach or approximate an equilibrium where unit price for a particular good or service is at a point where the quantity demanded equals the quantity supplied.

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Wikipedia