How does a market economy work?

A market economy is based on the principles of supply and demand, where the market will respond to changes in demand with changes in supply. Through competition, the price of products will reach a suitable equilibrium, allowing businesses to survive or fail without much interaction from the government.

However, a pure market economy is impractical to implement, most market economies around the world have a component of government influence. Realistically, in mixed economies like the GCC, the government influences supply and demand by providing subsidiaries, controlling the prices of certain goods and regulations in certain industries.