In a market economy, prices identify how scarce one good or service is compared to other goods and services. Prices determine who gets what goods and services. Prices are determined by supply and demand. In a market economy, profit is the incentive for entrepreneurs, competition is the regulator. An economy s performance is measured by changes in such economic indicators as Real Gross Domestic Product, employment and unemployment, and the price level.
Government influences the economy in both a macro and a micro sense.