Which of the following best describes how resources are allocated among economic groups in a market economy?

• A. By government officials assigning resources directly
• B. According to traditional customs and inheritance
• C. Through the interaction of supply and demand in markets
• D. Equally among all individuals regardless of contribution

Answer: (C)

Verified step by step guidance

1. Understand the concept of resource allocation in different economic systems: In a market economy, resources are allocated based on market mechanisms rather than government directives or traditions.
2. Recall that in a market economy, prices are determined by the forces of supply and demand, which signal how resources should be distributed among various economic groups.
3. Recognize that government officials assigning resources directly is characteristic of a command economy, not a market economy.
4. Note that allocation according to traditional customs and inheritance describes a traditional economy, which relies on historical patterns rather than market forces.
5. Understand that equal distribution regardless of contribution is not typical in market economies, where allocation depends on individuals' willingness and ability to pay, reflecting their contribution or demand.