'market-based' originates from English as a compound of 'market' and 'based'. 'Market' comes via Old French 'marché' (from Latin 'mercatus'), where 'mercatus' meant 'trade' or 'market'. 'Based' comes from 'base', ultimately from Old French 'bas' and Latin 'bassus'.

'market' entered Middle English from Old French 'marché' (itself from Latin 'mercatus'); 'based' is the past-participial/ adjectival use of 'base'. The compound phrase 'market based' has been used in modern English (20th century onward) and is often written with a hyphen as 'market-based' when used attributively.

Originally the elements meant 'place of trade' ('market') and 'having a base' ('based'); over time the compound came to be used specifically for policies, mechanisms, or decisions that are grounded in market forces—'determined by market mechanisms'.