In a market economy, what guides economic activity?

Question

Quizplus · Accepted Answer

Prices guide economic activity in a market economy. Prices are determined by supply and demand, and consumers and producers make choices based on the signals sent by those prices. The decisions of corporations and individuals are ultimately driven by the desire to make a profit or improve their economic well-being, which is influenced by market prices. The government may play a role in regulating the market, but it does not guide economic activity in the same way as prices do. Central planners, on the other hand, are typically associated with command economies, where economic activity is directed by a centralized authority rather than the market.

In a Market Economy, What Guides Economic Activity