What is a characteristic of a market economy?

In a market economy, individual consumers play a central role in driving both demand and supply. This characteristic defines how market economies operate, as decisions regarding what to produce, how much to produce, and at what price goods should be sold are largely determined by the interactions of consumers and businesses.

Consumers express their preferences through their purchasing choices, which signal to producers what goods are in demand. In response, companies adjust their production methods and quantities to meet those demands, striving to provide goods and services that consumers want. This dynamic is often referred to as the "invisible hand" of the market, where individual pursuits of self-interest lead to overall economic benefits.

In contrast, the other options describe characteristics typical of different economic systems. For instance, placing all production decisions in the hands of the government aligns with a command or planned economy rather than a market economy. Producing all goods using traditional methods reflects a more traditional or subsistence economy that relies on cultural practices rather than market forces. Lastly, resource allocation based on government plans points to central planning, a hallmark of command economies as well. Hence, the defining aspect of a market economy lies in the influence of consumers on supply and demand, making the provided choice the correct one.