In which type of economy are economic decisions made by individuals or through market forces?

In a market economy, economic decisions regarding the production, distribution, and consumption of goods and services are driven primarily by the interactions of individuals and businesses through supply and demand. This system allows for competition and consumer choice, meaning that prices are determined by how much consumers are willing to pay and how much producers are willing to accept.

In such an economy, individuals have the freedom to make their own choices regarding employment, production, and purchasing, which fosters innovation and efficiency as resources are allocated according to consumer needs and preferences. The role of government in a pure market economy is minimal, focusing instead on protecting property rights and maintaining the rule of law, thereby ensuring a fair playing field for all market participants.

This stands in contrast to command economies, where the government makes all significant economic decisions. In mixed economies, both market forces and government intervention play roles, while traditional economies are typically based on historical practices and subsistence farming, relying more on customs than market forces.