A market economy is an economic system that is dictated by the principle of supply and demand. These systems are commonly found in capitalist societies like the United States, United Kingdom, Canada, and so on.
In simple terms, a "market economy" refers to a system in which financial aspects of the economy like investment, exports/imports, and the price of goods is determined by the availability of the product or service and the public's desire for that product. For example, if apples are very popular (demand), someone might invest lots of money in an apple orchard. This changes, however, depending on the availability of apples (supply). Apples could be very popular, which means people buy lots of them, but if they are also widely available, the price will have to be competitive or people will just go buy them from someone else.
A real-world example of this are things that fall into the category of technology. Microsoft's XBox, for example, is a very popular product that is in high demand. Because so many people want an XBox and Microsoft is the only company that can make it, they can set the price relatively high because consumers can't get one from anyone else. When supply of this product is relatively low, like it might be around Christmas, the price can jump even higher because the demand is higher. Adding a similar product like the Playstation into the equation, demand for the XBox drops because someone is now offering an alternative. This is critically important because the price of the XBox is now tied to the price of its competitor, Playstation.
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