Final answer:
The economic system based on supply and demand is market capitalism or a free market. Governments can influence, but not negate, these market principles; interventions like price ceilings don't shift demand or supply but can cause shortages.
Step-by-step explanation:
The economic system that is based on the principles of supply and demand is market capitalism or a free market economy. In this system, the prices of goods and services are determined in a free price system set by a free and open exchange. Market forces within the economy are regulated by the levels of supply from the producers and the level of demand by the consumers.
Governments can attempt to influence market outcomes through policies, but they cannot negate the fundamentals of economic principles such as supply and demand. Any constraints or alterations, like a price ceiling, often result in unintended consequences that can counteract the initial intent of the policy. For instance, a price ceiling will usually not shift the demand or supply, but instead can lead to shortages as the impeded price can no longer equilibrate the market to clear excess demand.