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Question
In a free market economy, when consumers increase their purchase of a good and the level of _________ exceeds ________ then prices tend to rise.
In a free market economy, when consumers increase their purchase of a good and the level of _________ exceeds ________ then prices tend to rise.
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Solution
The correct option is A demand; supply
When a free market economy operates then price determination takes place through the combined forces of demand and supply of the commodity. When the consumers purchase larger quantities of a good, its demand increases, while the supply remains unchanged, which leads to a rise in the general price level.
When a free market economy operates then price determination takes place through the combined forces of demand and supply of the commodity. When the consumers purchase larger quantities of a good, its demand increases, while the supply remains unchanged, which leads to a rise in the general price level.
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