The key institutions that form the foundation of a market-oriented economy are:

1. Private Property: Private individuals, rather than governments, are the primary owners of resources, goods, and other assets.


2. Individual Freedom: Those who own resources, goods, and other assets have the freedom to use their property as they see fit.


3. Competitive Markets: Market are used to exchange privately owned commodities and to answer the three questions of allocation.

These three institutions create an economic environment that provides the incentives to achieve efficiency. In a market-oriented economy, buyers and sellers have the freedom to direct their resources through competitive markets to the highest valued uses.

A market-oriented economy, however, is definitely a mixed economy. While most allocation decisions are made voluntarily through market exchanges, governments also impose choices on the economy through regulations, taxes, and spending.

Two key functions that governments provide in a market-oriented economy are:

1. Legal System: Governments operate the legal system to establish the "rules of the game" and maintain order throughout society. Without such order individuals are discouraged from undertaking voluntary market exchanges.


2. Public Goods: Governments provide public goods, like national defense and education, that cannot be efficiently provided through voluntary market exchanges. These goods are provided directly through taxes and spending or indirectly through regulatory oversight.