In a free-market system, producers will react to an increase in demand when
A)the price goes up.
B)the government announces the increased demand.
C)their costs increase.
D)the free press publishes news of the increased demand.

Question

Quizplus · Accepted Answer

In a free-market system, the price mechanism plays a crucial role in signaling producers to increase production. When demand for a product increases, customers are willing to pay more for it, which leads to an increase in the market price. This increase in price incentivizes producers to increase production to capture the higher profits. Therefore, producers will react to an increase in demand when the price goes up.

In a Free-Market System, Producers Will React to an Increase