How can one solve the problem of ‘what to produce’ in the capitalist economy?
Answers
Answer:
Capitalist systems produce goods based on what consumers demand. Firms will produce anything that people will buy (at a price the firms can accept). Socialist systems produce goods based on what the government believes the people need
Answer:
What to Produce:
Let us consider the first question: ‘which commodities are to be produced and in what quantities? The commodities which do not command positive prices in the market would not be produced. Therefore only those commodities with positive prices are to be produced and in such a way that would clear the markets.
The quantity in which a commodity is to be produced is set at that level where demand equals supply. If quality produced is more or less, then there will be dis equilibrium in the market and price will fluctuate. Hence, to maintain stable equilibrium price it becomes necessary to make demand and supply equal. This rule is applicable for each commodity. In this way, first central problem is solved.