<Tr> <Td> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> </Td> </Tr> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> <P> A market economy is an economic system where decisions regarding investment, production, and distribution are based on the interplay of supply and demand, which determines the prices of goods and services . The major defining characteristic of a market economy is that investment decisions, or the allocation of producer good, are primarily made through capital and financial markets . This is contrasted with a planned economy, where investment and production decisions are embodied in an integrated plan of production established by a state or other organizational body that controls the factors of production . </P> <P> Market economies can range from free market systems to regulated markets and various forms of interventionist variants . In reality, free markets do not exist in pure form, since societies and governments all regulate them to varying degrees . Different perspectives exist as to how strong a role the government should have in both guiding and regulating market economies and addressing the inequalities the market naturally produces . Most existing market economies include a degree of state - directed activity or economic planning, and are thus classified as mixed economies . The term free - market economy is sometimes used synonymously with market economy . </P>

Who makes production decisions in a market economy
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