Question

how does consumers and producers in a capitalistic economy determine which goods to produce,

Answer 1

It's mainly all about supply and demand. The more the consumers want of a product, the more they will likely make, but a downside to that, is it will raise the prices of said product because they need more resources to produce more, so it will be more costly for the producer, which means the consumer will inevitably have to pay more for the products they want.