What is market economy? GROUP: B Short answer questions 4x5=20

A market economy is an economic system where the production, distribution, and pricing of goods and services are determined by the free interaction of supply and demand in the market, with minimal government intervention.

Key Features of a Market Economy:

• Private Ownership: Resources and businesses are owned by private individuals or firms.
• Price Mechanism: Prices are determined by market forces (supply and demand).
• Profit Motive: Businesses operate to maximize profits.
• Consumer Sovereignty: Consumers decide what to buy based on preferences and prices.
• Limited Government Role: The government’s role is restricted to maintaining law and order, enforcing contracts, and providing public goods like defense and infrastructure.

In a market economy, competition drives efficiency, innovation, and resource allocation. However, it may lead to inequalities and market failures if unregulated.