The U.S. has a “Free Market Economy”. Put simply, a free market economy is one in which decisions regarding investment, production and distribution are based on supply and demand. Prices of goods and services are determined by supply and demand. The idea is that the higher the price of a product or service the lower the demand. As an example, as gas prices went up, demand went down. What we have seen in the past several months as gas prices went up, demand fell about 10%.