In a market system, what must take place for quantity demanded to continually be equated with quantity supplied?
A) Price controls must be applied by governments.
B) Relative prices must be able to adjust to market clearing levels.
C) Tastes and preferences of consumers must adjust to eliminate surpluses or shortages.
D) Businesses must engage in involuntary, unprofitable exchanges to eliminate surpluses or shortages.

Question

Quizplus · Accepted Answer

In a market system, prices play an important role in ensuring that quantity demanded is equal to quantity supplied. As prices rise, quantity supplied increases and quantity demanded decreases, leading to a surplus. On the other hand, as prices fall, quantity supplied decreases and quantity demanded increases, leading to a shortage. This continuous adjustment of prices to market-clearing levels allows for quantity demanded and quantity supplied to remain in balance. Choices A, C, and D are incorrect because price controls by governments, change in consumers' preferences, and unprofitable exchanges by businesses do not necessarily ensure that quantity demanded is equated with quantity supplied.

In a Market System, What Must Take Place for Quantity