Needs to express his opinion about the following statement: " Markets are usually a good way...

Needs to express his opinion about the following statement: " Markets are usually a good way to organize Economic activity" for 2 posts

Expert Solution

Market organizes economic activities with the help of the invisible hand of the price mechanism. The price mechanism in the market regulates which goods are consumed and produced. The price mechanism reflects the relative demand and supply of resources. In the market, no central planner decides which goods are produced. Rather, numerous market participants decide which activities to get engaged in which, which goods to produce, which goods to consume, etc. on the basis of price. The demand and supply decide the equilibrium quantity and equilibrium price in the market. If a good is short in supply relative to its demand, its price will go up and rich an equilibrium until demand becomes equal to supply. Similarly, if the demand for a good is less relative to supply, its price will go down to the point at which demand becomes equal to supply. Market maximizes utility of the participants by reflecting their relative demand and supply.

Rahul Sunny answered 2 years ago

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