In a market economy, who primarily determines what goods and services are produced?

• A. Consumers and producers through their interactions in markets
• B. International organizations
• C. Religious institutions
• D. The government through central planning

Answer: (A)

Verified step by step guidance

1. Understand the role of different economic agents in a market economy: consumers, producers, government, and other institutions.
2. Recognize that in a market economy, decisions about what goods and services to produce are mainly driven by the choices and preferences of consumers and the production decisions of producers.
3. Recall that consumers express their preferences through their willingness to pay for goods and services, which signals producers about what to produce.
4. Producers respond to these signals by allocating resources to produce goods and services that are in demand, aiming to maximize profits.
5. Conclude that the interaction between consumers and producers in markets, through supply and demand mechanisms, primarily determines what goods and services are produced, rather than central planning or other institutions.