In a market economy, what guides economic activity?
A) the government
B) businesses
C) central planners
D) prices

Question

Quizplus · Accepted Answer

In a market economy, prices guide economic activity. Prices are determined by the forces of supply and demand, which are influenced by individual decisions made by both consumers and producers. Businesses respond to these price signals by adjusting production and pricing decisions in order to maximize profits. While the government may play a role in regulating certain aspects of the market, in a true market economy, economic activity is primarily driven by market forces such as supply and demand and the resulting prices.

In a Market Economy, What Guides Economic Activity