Assume the demand for product Y increases and the subsequent market system responses result in the production of more Y.This illustrates:
A)that the concept of derived demand is inapplicable.
B)that consumer sovereignty is inoperative in this economy.
C)the scarcity function of prices.
D)the directing or guiding function of prices.

Question

Quizplus · Accepted Answer

The increase in demand for product Y resulted in market system responses which guided the production of more Y. This illustrates the directing or guiding function of prices. Prices serve as signals to producers about what goods and services consumers want and guide the allocation of resources towards their production.

Assume the Demand for Product Y Increases and the Subsequent