Question
In a capitalist economic system, what is the primary
determinant for the allocation of goods and services?Solution
In capitalist economic systems, market forces drive the economy, with private ownership of capital and means of production. The allocation of goods and services is primarily determined by purchasing power rather than individual needs. This means that consumers must have sufficient financial resources to acquire goods, regardless of their necessity. This market mechanism can result in underproduction of essential goods like affordable housing for lower-income populations, as market-driven production responds to effective demand (backed by purchasing power) rather than need alone.
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