A market economy is a system where the production and distribution of goods and services are determined by supply and demand. In this type of economy, individuals and businesses make decisions based on their own interests, leading to competition and innovation. Prices are set by the market, reflecting what consumers are willing to pay. In a market economy, the role of the government is limited, primarily focusing on maintaining the rule of law and protecting property rights. Examples of market economies include the United States and Australia, where private ownership and free trade are encouraged, allowing for economic growth and consumer choice.