In a market economy, supply and demand determines who produces what, and the prices of products, labor, and capital. Origins of the Market Economy Market economics is rooted in the belief that individual concerns should be placed above group concerns. This approach to economics calls for less government interference in commerce and greater individual economic freedom. Canada and the United States each have a market economy. To function smoothly and properly, a market economy requires free choice , free enterprise , and price flexibility .
Free choice gives individuals access to alternative purchase options.
Free enterprise gives companies the ability to decide which goods and services to produce and the markets in which to compete. Price flexibility allows most prices to rise and fall to reflect the forces of supply and demand. The government has little direct involvement in business but does play an important role in enforcing antitrust laws, preserving property rights, providing a stable fiscal and monetary environment, and preserving political stability. The worst rated countries on economic freedom are North Korea, Cuba, and Iraq. The highest rated countries on economic freedom are Hong Kong, Singapore, Bahrain, and New Zealand.