Market Economy Examples

by Stephanie Faris ; Updated May 03, 2018
Seller showing product

The U.S. economy incorporates an interesting blend of concepts, including a free market in which individuals control their own resources. Items are sold by businesses and purchased by customers who do so freely. In such a market, governments intervene only to set the rules and regulations necessary to protect consumers. A market economy may be called a free market, free economy or free market economy.

What Is a Market Economy?

A market economy is defined by the control that businesses and consumers have over trade. This type of economy assumes that supply and demand will drive the economy, with no need for the government to step in. But consumer protection is another important element of a market economy, since oversight is always necessary.

In a market economy, businesses, in theory, could set prices at the highest point they think customers would pay. However, a free market also encourages competition, since there’s no limit to the number of businesses that can sell a certain type of good or service. Market economies strive to avoid monopolies to keep that competition going.

History of the Market Economy

The market economy goes all the way back to the early days of humans trading with each other. This is thought to date back to between 9000 and 6000 B.C. Money wasn’t used in trade until 1000 B.C. when metallic coins were first manufactured in China. Before that, humans traded items like cattle for goods and services, without government entities overseeing the exchange.

Once currency became an integral part of trade, two types of economies began to emerge: the market economy and the command economy, which is defined by more socialist tendencies. Over time, though, most economies have adapted traits of each type, which means no economy is 100 percent market or command. They all operate somewhere between the two extremes.

Video of the Day

Brought to you by Techwalla
Brought to you by Techwalla

Market Economy Examples

According to the 2018 Index of Economic Freedom, Hong Kong ranks as the freest economy in the world. Although regulatory authorities work hard to prevent corruption, free trade is encouraged, with a 2016 reduction in fees making it even easier to start a business there. Singapore’s economy is also praised for its free economy, with recent improvements in labor freedom and property rights boosting its score. However, the nation gets low marks for business freedom, due in part to recent crackdowns on foreign labor.

The U.S. falls at 18th place on the economic freedom index, ranking below the U.K., Canada and Australia. Although the labor market in the U.S. has improved, and tax reforms boost its score, the decline in rankings for government integrity has caused it to drop down the list. At the same time, other areas in the world are showing improvements that make it difficult for the U.S. to compete.

About the Author

Stephanie Faris is a novelist and business writer whose work has appeared on numerous small business blogs, including Zappos, GoDaddy, 99Designs, and the Intuit Small Business Blog. She worked for the State of Tennessee for 19 years, the latter six of which were spent as a supervisor. She has written about business for entrepreneurs and marketing firms since 2011.

Cite this Article A tool to create a citation to reference this article Cite this Article