Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It determines the price and quantity available in the market.
B
It eliminates the need for any government intervention.
C
It ensures that all goods are distributed equally among consumers.
D
It leads to a surplus of all private goods.
Understanding the Answer
Let's break down why this is correct
Answer
In an economy where resources are limited, the interaction of supply and demand plays a crucial role in deciding how private goods are distributed. When demand for a good, like smartphones, is higher than the available supply, prices tend to rise. This increase in price encourages producers to create more smartphones and signals consumers to buy less or wait for a better deal. Conversely, if there is more supply than demand, prices will drop, making the goods more accessible to consumers. Ultimately, this balance helps allocate resources efficiently, ensuring that goods go to those who value them most.
Detailed Explanation
Supply and demand work together to set prices. Other options are incorrect because Some people think that supply and demand can solve all problems; It's a common belief that everyone gets the same amount of goods.
Key Concepts
supply and demand
private goods
Topic
Resource Allocation and Scarcity
Difficulty
medium level question
Cognitive Level
understand
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