<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> <P> Market economies do not logically presuppose the existence of private ownership of the means of production . A market economy can and often does include various types of cooperatives, collectives, or autonomous state agencies that acquire and exchange capital goods in capital markets . These all utilize a market - determined free price system to allocate capital goods and labor . In addition, there are many variations of market socialism, some of which involve employee - owned enterprises based on self - management; as well as models that involve the combination of public ownership of the means of production with factor markets . </P> <Table> <Tr> <Td> Part of a series on </Td> </Tr> <Tr> <Th> Capitalism </Th> </Tr> <Tr> <Td> </Td> </Tr> <Tr> <Td> Concepts (show) <Ul> <Li> Business </Li> <Li> Business cycle </Li> <Li> Businessperson </Li> <Li> Capital </Li> <Li> Capital accumulation </Li> <Li> Capital markets </Li> <Li> Capitalist mode of production </Li> <Li> Company </Li> <Li> Corporation </Li> <Li> Competitive markets </Li> <Li> Economic interventionism </Li> <Li> Economic surplus </Li> <Li> Entrepreneurship </Li> <Li> Fictitious capital </Li> <Li> Financial market </Li> <Li> Free price system </Li> <Li> Free market </Li> <Li> Goods and services </Li> <Li> Investor </Li> <Li> Invisible hand </Li> <Li> Liberalization </Li> <Li> Marginalism </Li> <Li> Money </Li> <Li> Private property </Li> <Li> Privatization </Li> <Li> Profit </Li> <Li> Supply and demand </Li> <Li> Surplus value </Li> <Li> Value </Li> <Li> Wage labour </Li> <Li> Wage slavery </Li> </Ul> </Td> </Tr> <Tr> <Td> Economic systems (show) <Ul> <Li> Anglo - Saxon </Li> <Li> Free market </Li> <Li> Laissez - faire </Li> <Li> Mercantile </Li> <Li> Mixed </Li> <Li> Nordic </Li> <Li> Regulated market </Li> <Li> Regulatory </Li> <Li> Rhine </Li> <Li> Social market </Li> <Li> State </Li> <Li> Welfare </Li> <Li> East Asian </Li> </Ul> </Td> </Tr> <Tr> <Td> Economic theories (show) <Ul> <Li> American </Li> <Li> Austrian </Li> <Li> Chicago </Li> <Li> Classical </Li> <Li> Institutional </Li> <Li> Keynesian </Li> <Li> Marxian </Li> <Li> Modern Monetary </Li> <Li> Monetarist </Li> <Li> Neoclassical </Li> <Li> New institutional </Li> <Li> New Keynesian </Li> <Li> Supply - side </Li> </Ul> </Td> </Tr> <Tr> <Td> Origins (show) <Ul> <Li> Age of Enlightenment </Li> <Li> Capitalism and Islam </Li> <Li> Commercial Revolution </Li> <Li> Feudalism </Li> <Li> Industrial Revolution </Li> <Li> Mercantilism </Li> <Li> Primitive accumulation </Li> <Li> Physiocracy </Li> <Li> Simple commodity production </Li> </Ul> </Td> </Tr> <Tr> <Td> Development (show) <Ul> <Li> Advanced </Li> <Li> Consumer </Li> <Li> Corporate </Li> <Li> Crony </Li> <Li> Finance </Li> <Li> Global </Li> <Li> Late </Li> <Li> Marxist </Li> <Li> Merchant </Li> <Li> Rentier </Li> <Li> State monopoly </Li> <Li> Techno </Li> </Ul> </Td> </Tr> <Tr> <Td> People (show) <Ul> <Li> Adam Smith </Li> <Li> John Stuart Mill </Li> <Li> David Ricardo </Li> <Li> Thomas Malthus </Li> <Li> Jean - Baptiste Say </Li> <Li> Milton Friedman </Li> <Li> Friedrich Hayek </Li> <Li> John Maynard Keynes </Li> <Li> Alfred Marshall </Li> <Li> Ludwig von Mises </Li> <Li> Ayn Rand </Li> <Li> Murray Rothbard </Li> <Li> Joseph Schumpeter </Li> <Li> Thorstein Veblen </Li> <Li> Max Weber </Li> <Li> Ronald Coase </Li> </Ul> </Td> </Tr> <Tr> <Td> Related topics (hide) <Ul> <Li> Anti-capitalism </Li> <Li> Black capitalism </Li> <Li> Capitalist state </Li> <Li> Consumerism </Li> <Li> Corporatism </Li> <Li> Crisis theory </Li> <Li> Criticism of capitalism </Li> <Li> Cronyism </Li> <Li> Culture of capitalism </Li> <Li> Exploitation </Li> <Li> Globalization </Li> <Li> History </Li> <Li> History of theory </Li> <Li> Market economy </Li> <Li> Periodizations of capitalism </Li> <Li> Perspectives on capitalism </Li> <Li> Post-capitalism </Li> <Li> Speculation </Li> <Li> Spontaneous order </Li> <Li> Venture philanthropy </Li> </Ul> </Td> </Tr> <Tr> <Td> Ideologies (show) <Ul> <Li> Anarcho - capitalism </Li> <Li> Democratic capitalism </Li> <Li> Dirigisme </Li> <Li> Eco-capitalism </Li> <Li> Humanistic capitalism </Li> <Li> Inclusive capitalism </Li> <Li> Liberalism (economic) </Li> <Li> Libertarianism </Li> <Li> Neo-Capitalism </Li> <Li> Neoliberalism </Li> <Li> Objectivism </Li> <Li> Ordoliberalism </Li> <Li> Social democracy </Li> </Ul> </Td> </Tr> <Tr> <Td> <Ul> <Li> Capitalism portal </Li> <Li> Economics portal </Li> <Li> Philosophy portal </Li> <Li> Politics portal </Li> </Ul> </Td> </Tr> <Tr> <Td> <Ul> <Li> </Li> <Li> </Li> <Li> </Li> </Ul> </Td> </Tr> </Table>

Who controls the factors of production in a free market economy
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