In which type of economy are economic decisions made by individuals and businesses?

In a market economy, economic decisions are primarily made by individuals and businesses based on supply and demand. This system emphasizes consumer choice and the role of competition among businesses, allowing prices to fluctuate based on what consumers are willing to pay and what producers are willing to accept. In this type of economy, the government has a limited role, focusing more on protecting property rights and ensuring the market operates efficiently rather than controlling economic activities. This dynamic allows for innovation and responsiveness to consumer needs, as businesses strive to meet the demands of the market. Each entity operates with the freedom to make decisions regarding production and consumption, which drives economic growth and development.