Market economy

How it is used

Used in textbooks and political economy to compare systems: a market economy, a planned economy and a mixed economy. In practice all modern economies are mixed, so people speak of more or less market-oriented economies. The transition to a market economy describes former socialist countries in the 1990s.

Example sentences

1. In a market economy, a shortage usually pushes prices up until supply catches up.

2. Several countries in Central Europe made the move to a market economy in the 1990s.

Common collocations

• free market economy
• transition to a market economy
• functioning market economy
• social market economy

Related terms

• planned economyAn economic system in which the state decides what is produced, how much, and at what price, instead of leaving these choices to markets.
• marketAny arrangement, physical or online, where buyers and sellers meet to exchange goods, services or assets, and where prices are formed.
• private sectorThe part of the economy made up of businesses and organisations that are owned by individuals or companies rather than by the state.
• invisible handAdam Smith's image for the way markets can turn people's self-interest into results that benefit society, without anyone planning it.
• competitionRivalry between firms that sell similar products and try to win the same customers, which tends to push prices down and quality up.

More terms: Core Concepts

• economy
• microeconomics
• macroeconomics
• scarcity
• opportunity cost
• incentive
• trade-off
• diminishing returns
• ceteris paribus
• capital
• goods and services
• household