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In a capitalist economy, the question 'for whom to produce' is settled mainly by an individual's:
AMembership in the central planning board
BBuying capacity, which depends on income
CEqual entitlement guaranteed by the state
DPosition in a fixed social hierarchy
Answer & Solution
Correct answer: B. Buying capacity, which depends on income
1. Goods are produced for those who can pay for them.
2. Buying capacity rests on income from work and property owned.
3. Higher income means higher buying capacity and demand.
4. Equal state entitlement and planning boards belong to socialism, so they are ruled out.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit II "Basic Problems of an Economy and Role of Price Mechanism", p.3_
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