A market economy is a type of economic structure where supply and demand signals on pricing impact decisions regarding investment, production, and distribution. One essential component of a market economy is the existence of factor markets, which regulate the allocation of capital and the means of production.
Market economies can take many different forms. They can be minimally regulated free-market or laissez-faire systems, in which the government's role is restricted to protecting private property and providing public goods and services, or they can be interventionist systems, in which the government actively works to address market inefficiencies and advance social welfare.