Question

____________ is fundamental to the operation of a free-enterprise economy.

• A. Price legislation
• B. Government intervention
• C. Price mechanism
• D. Both B & C

Answer 1

Answer: (C)

Price mechanism

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions.