In capitalist societies, which of the following best describes how resources are allocated?

• A. Resources are allocated by central government planning.
• B. Resources are distributed equally among all citizens.
• C. Resources are allocated primarily through the price mechanism in markets.
• D. Resources are allocated based on tradition and customs.

Answer: (C)

Verified step by step guidance

1. Understand the concept of resource allocation in different economic systems: In capitalist societies, resource allocation refers to how goods, services, and factors of production are distributed among individuals and firms.
2. Recognize the role of the price mechanism: In capitalist economies, prices are determined by supply and demand in markets, which signals to producers and consumers how to allocate resources efficiently.
3. Contrast with other allocation methods: Central government planning is typical of command economies, equal distribution is more related to socialist ideals, and allocation based on tradition applies to traditional economies.
4. Identify that in capitalist societies, the price mechanism guides decisions by providing incentives and information, leading to voluntary exchanges and efficient resource use.
5. Conclude that the best description of resource allocation in capitalist societies is that resources are allocated primarily through the price mechanism in markets.