Question

In a market economy,

Select one:

a. supply determines demand and demand, in turn, determines prices.

b. demand determines supply and supply, in turn, determines prices.

c. the allocation of scarce resources determines prices and prices, in turn, determine supply and demand.

d. supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

Answer 1

The correct answer is letter "D": supply and demand determine prices and prices, in turn, allocate the economy's scarce resources.

Step-by-step explanation:

In a Market Economy, economic decisions and prices are determined by market forces rather than by central planning. Market forces refer to the collective effects of all the decisions made by individuals participants in the economy such as consumers and businesses according to their free will.

In other words, supply and demand are the regulators of a Market Economy determining prices also allocating scarce resources.