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ArunKumar10
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Each society has first of all to determine what to produce. Let us explain what is meant by this with the help of an illustration. What to produce refers to the kind of goods to be produced and the quantities of each fo the goods to be produced. Take for example the cultivation fo crops on land. The producers of crops will have to decide whether to grow rice or sugarcane in their fields. If rice and sugarcane are already being produced by them they may have to decide whether they should put more land under rice and less land under sugarcane or vice versa. This depends, in a free market economy, on whether the demand for rice is going up or that of sugarcane is rising. If the price of rice in the market goes up due to a rise in the demand for it, it is a signal for increasing the production of rice. If, on the other hand, the price of sugarcane rises in the amrket, it is a reflection of the increased demand for it and growers of sugarcane will put more land under sugarcane to earn more profits.
Thus the production of each crop will be governed by changes, in the demand for it in the market. In a capitalist society, there is a free market and the producetion of varioud goods and their quantities are determinded by the market forces namely, demand, supply and price. Therefore, we can say that the kind of economic system in which the producers undertake production in response to the market signals, only, namely changes in prices and the resuting changes in demand, is the capitalist economic system.