Correct Answer: Market mechanism

Solution : The correct answer is (b) Market mechanism.

In a market economy, the allocation of resources is primarily determined by the market mechanism, also known as the price mechanism. The market mechanism operates through the interaction of supply and demand in competitive markets.

The market mechanism works as follows:
1. Producers supply goods and services to the market based on the price signals they receive. If prices are high, indicating strong demand, producers are incentivized to increase production. Conversely, if prices are low, indicating weak demand, producers may reduce production.
2. Consumers express their preferences and demand for goods and services through the prices they are willing to pay. Higher prices for a particular product indicate greater consumer demand, while lower prices suggest lower demand.
3. The market equilibrium is achieved when supply and demand reach a balance, with prices adjusting to equate the quantity supplied and quantity demanded.
4. Resources are allocated to the production of goods and services that are in demand by consumers and can be sold at profitable prices. Producers who are more efficient or offer better value tend to attract more resources and market share.

Therefore, the correct answer is (b) Market mechanism.