If the prices of goods and services were ﬂexible, then the economy could always produce at its
optimal capacity.

Question

Quizplus · Accepted Answer

If the prices of goods and services were flexible, then changes in supply and demand would lead to market equilibrium, allowing the economy to produce at its optimal capacity. This is the basic principle of a market-driven economy. However, there are other factors (such as government regulations, taxes, and subsidies) that can affect the economy's optimal capacity as well.

If the Prices of Goods and Services Were ﬂExible, Then