Question 5
Economic SystemsIn a capitalist economy, the economic problem of what goods to produce is decided mainly by
- A.shadow prices
- B.profit level
- C.relative prices
- D.a central planner.
Show the answer and explanation
Answer: C (relative prices)
Explanation
In a capitalist economy there is no central planner: changes in relative prices signal what consumers want, and producers move resources towards the goods whose prices make them most rewarding.