A market economy definition is one that has long been used and understood by economists. The basic concept is that a market economy allows for a free flow of goods and services from consumers to producers and from producers to consumers. It also describes a way of life characterized by stable prices and a level of private control over the distribution of goods and services.
A market economy definition also refers to a set of concepts and ideas about how individuals and groups interact to affect the distribution of goods and services. These include the theory of the market structure, the theory of prices and the concept of the command economy. All these concepts are based on the assumption that individuals, groups and the state have the power to coordinate their actions so as to reach their own ends with the help of the market mechanism. This process is called the market economy system.
The market economy definition maintains that individuals can set their own limits and determine the rules of the game. They decide what they want, when they want it and for how much. In this way, they are able to coordinate the actions of producers and consumers on a level playing field. It also makes possible the free market system that was mentioned earlier. The concept here is that people can purchase goods and services at the right price or in the right quantity according to their own wishes.
However, many opponents of a free economy definition of a market system believe that the market does not offer sufficient goods and services to all consumers. It is also said that some goods and services are better off being supplied by the state rather than offered by a competitive market. Proponents of a free economy believe that a consumer has the right to buy whatever he needs and wants, provided that the action is done within the confines of the law and the rights defined by the Constitution and Bill of Rights. According to them, government action cannot take away a consumer's rights.
A different school of thought believes that the economy operates according to market forces. Market forces can be either positive or negative, but they always affect the outcome in some manner. For example, some consumers may be interested in buying a particular good or service, but there are certain market forces that prevent them from doing so. In such cases, the government or some other entity has to step in and fill the gap to meet the demand, and do so in the safest manner possible. This concept is called self-interest or entrepreneurs.
One school of thought is that markets are self-interested in nature and cannot exist without government action. Government intervention is necessary to assure that goods and services are sold in adequate quantities. If not, then a drop in overall economic activity occurs. In order . . . . . . to prevent such a drop, government intervention is called for to ensure adequate production of goods and services, to make sure that prices are fair and equitable, and to ensure quality of goods and services at all times. A limited government interventionist system may not work out very well for everyone, as it requires the consent of the relevant market participants to assure that the distribution of goods and services follows a certain path and is consistent with overall goals and objectives. A market economy offers limited government intervention and laissez faire for consumers, which may not be desirable.