For each good produced in a free market economy, demand and supply determine:
A) the price of the good, but not the quantity.
B) the quantity of the good, but not the price.
C) both the price and the quantity of the good.
D) neither price nor quantity; sellers determine the price.

Question

Quizplus · Accepted Answer

In a free market economy, both the price and the quantity of the good are determined by the interaction of demand and supply. As demand for a good increases, the price of the good will also increase until the quantity supplied matches the quantity demanded, at which point the market will reach equilibrium. Similarly, if demand for a good decreases, the price will decrease until the quantity supplied matches the new quantity demanded. Thus, both the price and the quantity of the good are determined by the forces of supply and demand in a free market economy.

For Each Good Produced in a Free Market Economy, Demand