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A market economy is economy based on the power of division of labor in which the prices of goods and services are determined in a free price system set by supply and demand.This is often contrasted with a planned economy, in which a central government determines the price of goods and services using a fixed price system. Market economies are also contrasted with mixed economy where the price system is not entirely free but under some government control or heavily regulated, which is sometimes combined with state-led economic planning that is not extensive enough to constitute a planned economy.

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