Question 4
Economic SystemsWhich of the following is applicable in a wholly capitalist economy?
- A.There is government intervention in price determination
- B.Consumer sovereignty does not exist
- C.The price mechanism allocates resources
- D.Households cannot freely decide what to spend on goods and services
Show the answer and explanation
Answer: C (The price mechanism allocates resources)
Explanation
In pure capitalism there is no government direction; prices set by demand and supply decide how resources are used.