Question

1)In a market economy,____ motivates both buyers and sellers.

2)According to Adam Smith, in a market economy, there is___ need for government intervention because the invisible hand of the marketplace guides the market.
3)The more scarce a resource is, the___ the price will be.
4)The more producers there are of a good in a market, the ___the price will be.
5)In a market economy, resources are allocated by___ the resource.
6)Market economies bring more___ for people.
7)Market economies provide consumers with___ goods of a___ quality at___ prices.

1) A) The government B) Profit C) Self-interest D) quality
2) A) Complete B) Substantial C) some D) little
3) A) More Stable B) lower C) more unstable D) higher
4) A) lower B)more stable C) higher D) more unstable
5) A) Ability to pay for B) government allocation of C) personal connections to
D) Ability to produce
6) A) A freedom B) restrictions C) laws D) government control
7) 1) A) fewer B) more
2) A) lower B) questionable C) government specified D) higher
3) A) stagnant B) higher C) government-set D) lower

Answer 1

1)C) Self-interest

2)D) little

3)D) higher

4) A) lower

5)D) Ability to produce

6)A) A freedom

7) 1)B) more

2) D) higher

3)D) lower

Step-by-step explanation:

According to Adam Smith and the theory of free market, self interest is what regulates the market, this means that people will work and buy for their self interest, and this would make offer and demand to control the price of products on the market, the higher the offer compared to the demand, the price would go up, and the higher the demand compared to the offer the price will go down.

Answer 2

1) In a market economy, self-interest motivates both buyers and sellers.

Market is basically the arrangement between buyers and sellers to exchange services and products. Thus, a seller (a butcher) sells meat for his self-interest (buy goods with the profits) and the buyer self-interest might be to feed his family.

2) According to Adam Smith, in a market economy, there is little need for government intervention because the invisible hand of the marketplace guides the market.

The idea of the Invisible Hand was introduced by Smith to explain that without the inteference of the government, self-interest and competition would play a role in the equilibrium of the free market.

3) The more scarce a resource is, the higher the price will be.

According to the Scarcity Principle, when the demand his higher than the supply, the price should be increased until the equilibrium between demand and supply is achieved.

4) The more producers there are of a good in a market, the lower the price will be.

When we have multiple producers of the same good in a market, they will have to lower their prices in order to attract the customers from the competitors and sell their products.

5) In a market economy, resources are allocated by ability to pay for the resource.

In a market economy, resources are allocated according to the prices that potential customers are willing to pay for the products.

6) Market economies bring more freedom for people.

In market economies, without government control or restrictions, people have more freedom to manage their finances and products.

7) Market economies provide consummers with more goods of a higher quality at lower prices.