What is the defining characteristic of a free market economy?

In a free market economy, the defining characteristic is that the means of production are privately held by individuals and firms. This allows for the ownership of resources, such as land, capital, and labor, to be determined by market participants rather than the state. In such an economy, individuals and firms are free to make their own decisions regarding production, distribution, and consumption based on supply and demand dynamics.

Private ownership encourages competition, innovation, and efficiency, as businesses strive to meet consumer needs and preferences while maximizing their own profits. This system contrasts with other economic models where the state plays a significant role in ownership and control of resources, limiting individual economic freedom. In a free market, the decisions made by individuals and firms directly influence prices, production levels, and the allocation of resources without government intervention.