Solution of Economic Problems in Different Types of Economy In the capitalist economy such problems are solved by price mechanism. In the capitalist economy price acts as the indicator of the director of profitable investment. Those commodities whose demand prices are high and are profitable to produce will be produced. For this purpose, only those techniques or factors of production will be employed, which cost less as indicated by the prices of factors. Moreover, the commodities will be produced for those sections of the people who have good incomes are in a position to pay their prices. Therefore, in a free capitalist economy, it is the price mechanism. Which solves the central problems of the economy. Price-mechanism establishes an equilibrium price-both in the commodity marker and in the factor marker. Equilibrium prices in the commodity market and in the factor market are determined through the forces of demand and supply in the various markets. But in a sociali...