Question

Pick one of the five fundamental questions and explain how it is answered by the market system

Answer 1

The five fundamental questions in the market system are:-

1. What goods and services will be produced?
2. How will the goods and services be produced?
3. Who will get the goods and services?
4. How will the system accommodate change?
5. How will the system promote progress?

Now, the question is what goods and services will be produced in an economy, so it is straight forward that the goods and services which have high demand in the economy or the goods and services if produced have higher profit margins or profit values for the producers will be produced. Firms and enterprises will start participating as long as there is profit shares, they will expand there branches in different sections and part of the economy in order to maximize the profits, when this demand for goods and services will lower down automatically the participants and the size of organisations will contract.