Demand and supply framework explains how prices are formed in a competitive markets.

Question

Quizplus · Accepted Answer

The demand and supply framework is a commonly used model in economics that explains the price formation process in competitive markets. It suggests that the price of a good or service is determined by the interaction between the quantity demanded by buyers and the quantity supplied by sellers. When demand exceeds supply, the price tends to rise, and when supply exceeds demand, the price tends to fall until the market reaches an equilibrium price. Therefore, the answer is true.

Demand and Supply Framework Explains How Prices Are Formed in a Competitive