For whom are goods and services produced in a market economy

This decision is a matter for both government and the private sector. The government has to decide what goods and services to provide and how much of each to provide. As we have seen, more of one thing generally means less of another (opportunity cost), so some difficult decisions arise here.

The private sector also has to decide what to produce, but this will tend to be decided by the market. Firms will examine demand and try to produce goods where there is the greatest level of demand. This question is then answered by the market forces of demand and supply.