The concept of supply and demand is often called the heart and soul of economics. It is the foundation for much of what is studied in the field. Understanding how supply and demand affect the economy helps us recognize economics everywhere in our daily lives.
The market economy is an economy in which decisions regarding investment, production, and distribution are based on supply and demand, and the prices of goods and services are determined in a free price system. But how did this affect early capitalism? The market economy would allow people to choose their owns prices for their goods.
The United States has a market economy, in which goods are bought and sold and prices are determined by the free market, with minimal external government control. Research to find other market economy countries by viewing the 2015 Index of Economic Freedom. Choose a country in the top five and explain why it ranks highly.