In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold.

Market Economy

An economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's citizens and businesses.

Supply and Demand

The economic model that determines the price of an item in a market, based on the quantity of the good that producers wish to sell at various prices and the quantity that consumers wish to buy.