Asked by Breanna Beaver on May 10, 2024
Verified
If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.
Competitive Market
A market structure characterized by a large number of buyers and sellers, where no single entity can dictate the market price.
Government Regulation
Laws and rules established by governments to control the behavior of businesses and individuals to achieve policy objectives.
- Gain an understanding of the notion of equilibrium price and the manner in which market forces converge to establish it.
- Understand how price acts as a rationing mechanism in free markets and the efficiency of this process.
Verified Answer
CQ
Camryn QuickMay 11, 2024
Final Answer :
True
Explanation :
In a competitive market free of government regulation, prices adjust due to the forces of supply and demand. When demand increases, prices rise, encouraging more supply. Conversely, if supply exceeds demand, prices fall, reducing supply or increasing demand until equilibrium is reached.
Learning Objectives
- Gain an understanding of the notion of equilibrium price and the manner in which market forces converge to establish it.
- Understand how price acts as a rationing mechanism in free markets and the efficiency of this process.