Practicing Success

Target Exam

CUET

Subject

General Test

Chapter

General Knowledge

Topic

Economics

Question:

Who answers the three questions i.e., what to produce, how to produce and for whom to produce in a "Capitalist" economic system?

Options:

Government

Market forces of demand and supply

Both 1 and 2

None of the above

Correct Answer:

Market forces of demand and supply

Explanation:

In a market economy, also called capitalism, market forces decides what goods are to be produced in accordance with the demand in the society. i.e., goods that can be sold profitably either in the domestic or in the foreign markets. If cars are in demand, cars will be produced and if bicycles are in demand, bicycles will be produced. If labour is cheaper than capital, more labour-intensive methods of production will be used and vice-versa. In a capitalist society the goods produced are distributed among people not on the basis of what people need but on the basis of Purchasing Power—the ability to buy goods and services.