Features of Market EconomyFeatures of Market Economy

Features of Market Economy; A market economy, often known as a free market economy or capitalism, is an economic system distinguished by many key characteristics. In a market economy, the bulk of resources and means of production are held by private persons or businesses rather than the state.

This private ownership, combined with low government interference, generates a one-of-a-kind economic environment. In this article we will explain about Features of Market Economy step by step.

8 Features of Market Economy

A market economy, also known as a free-market economy or capitalism, is characterized by several key features.Here are Main Features of Market Economy are as follows.

1.Private property

The right of private property is a major feature of market economy. It means that productive resources such as land, factories, mines etc. are under private ownership and the owners have right to own, control and dispose these means of production.

2.Freedom of choice

There is freedom of choice in market economy. It means a firm is free to decide what to produce and what production method to use; workers are free to choose occupations for which they are qualified and consumers are free to buy goods and services which they feel appropriate for their wants.


In the free market economy, competition exists between sellers to attract customers, among the workers to get jobs and among the buyers to obtain goods to satisfy their wants. Competition promotes best use and efficient allocation of resources in the free market economy.

4.Consumers’ sovereignty

Under the market economy, consumer is supposed to be supreme and is compared to be a king. The goods and services are produced according to the demand of the consumers.


The free market economy is based on the principle of self- interest. It means that individuals should be free to do as they wish. Each unit in the economy attempts to do what is best for itself. Firms act in such a way which leads to maximum profits or minimum losses. Workers move to those occupations which offer them highest wages. Consumers spend their income on those things which give them maximum satisfaction.

6.Market mechanism

The free market economy functions through ‘market- mechanism’. It means that economic problems are solved through the operation of demand and supply forces which determine equilibrium prices in the market. Both buyers and sellers make decision on the basis of price of the product in the market.

7.Limited role of government

Since the free market economy functions through market mechanism, there is obviously little role for the government to play. Thus, the role of government is to maintain law and order and create infrastructures that help to increase production and overall economic development.

8.Profit motive

In the free market economy, economic activities are undertaken with the aim of earning profit. All the decisions regarding what to produce, how to produce and for whom to produce are taken on the basis of profit but not on the basis of social welfare.

Also Check : Market Of Economy Meaning| Features,Benefits & Disadvantages.

FAQ,s Features of Market Economy

What is “private ownership” in a market economy?

Private ownership means that individuals and businesses can own and control things like land, factories, and stores. It’s their property, and they can use it to make money.

What does “economic freedom” mean in a market economy?

Economic freedom is about people having the freedom to buy, sell, and invest in what they want. The government doesn’t control most of their money decisions.

How does “competition” work in a market economy?

Competition means that many businesses try to do better than each other. They make better products and offer good prices to attract customers.

What is the “price system” in a market economy?

The price of things is decided by how much people want them. If many people want something, its price goes up. If not many people want it, the price goes down.

What is the “profit motive” in a market economy?

The profit motive means that people and businesses want to make money. They work hard and come up with new ideas to make better products and services.

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