Question

explain allocation of resources in market system

Answer 1

In principle resources are allocated to goods and services where there is the expectation of monetary profit accruing to  the  business concerned.  However there is no guaranteed that a profit will be procured and decision-making is to a large extent based on entrepreneurial guesswork which can turn out to be quite mistaken  and can have very wasteful consequences.Also, because under a market economy production is geared to market exchange in the expectation of a monetary profit. rather than directly for human needs, a very sizeable and arguably growing share of economic activity that is undertaken is completely useless and wasteful from the standpoint of meeting human needs.  It simply exists to serve the systemic needs of the market economy itself.  The entire financial sector is an example of this.This one productive advantage  alone that a non market system of production has over a market economy , where wealth is produced  directly and solely for human need, will probably mean a doubling of socially useful output by comparison with market capitalism.  However such a system has yet to be established and is not to be confused with the kind of state run capitalism that operated in places like the Soviet Union