Question

In a free-market economic system, if consumers perceive the price for a state-of-the-art smartphone as too high for the value received, they are likely to avoid buying it. In the same light, if the:________

Answer 1

Answer:

C) consumer’s desired price is too low, producers may limit the amount produced

Explanation:

Free markets follow the laws of rational expectations, and supply and demand.

If consumers believe that any product or service is too expensive and does not provide enough satisfaction that will justify its high price, then they will simply not purchase it.

On the other hand, if businesses see that the quantity demanded for a good or service is too low, then they will reduce its production until an equilibrium quantity and price is reached. If businesses overstock themselves, they are going to lose money, and businesses are not willing to lose money.

Answer 2

Answer:

price the consumers are ready to pay is too low, producers may reduce the amount produced

Explanation:

In a free market, the price system otherwise referred to as price mechanism allocates resources, the basic laws of demand is seen at work and the interplay between demand and supply determine equilibrium price.

When prices are too high demand will drop and when prices are too low the suppliers will reduce supply which will drive the price toward equilibrium.