Supply and demand
Market economies rely upon a price system to signal market actors to adjust production and investment. Price formation relies on the interaction of supply and demand to reach or approximate an equilibrium where unit price for a particular good or service is at a point where the quantity demanded equals the quantity supplied.
Governments can intervene by establishing
price ceilings or price floors in specific markets (such as
minimum wage laws in the labor market), or use
fiscal policy to discourage certain consumer behavior or to address market externalities generated by certain transactions (
Pigovian taxes). Different perspectives exist on the role of government in both regulating and guiding market economies, and in addressing social inequalities produced by markets. However, fundamentally a market economy requires that a price system affected by supply and demand exists as the fundamental mechanism for allocating resources irrespective of the level of regulation.
For market economies to function efficiently, governments must establish clearly defined and enforceable
property rights for assets and capital goods.
However market economies do not logically presuppose the existence of
private ownership of the
means of production. Market economies can and often do include various types of
cooperatives or autonomous
state-owned enterprises that acquire
capital goods and raw materials through
capital markets. These enterprises 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