In a purely free market economy, which entity primarily determines the prices and quantities of goods and services?
Understand the Problem
The question asks about how prices and quantities of goods/services are determined in a purely free market economy. We need to identify the entity responsible for this determination based on the options provided.
Answer
Supply and demand
In a purely free market economy, prices and quantities of goods and services are primarily determined by supply and demand.
Answer for screen readers
In a purely free market economy, prices and quantities of goods and services are primarily determined by supply and demand.
More Information
In a free market economy, the interaction of supply (the quantity of a good or service that producers are willing to offer) and demand (the quantity that consumers are willing to buy) determines the equilibrium prices and quantities.
Tips
It's important to remember that a purely free market economy is an idealized model. In reality, most economies are mixed economies, where the government plays a role in regulating markets to varying degrees.
Sources
- Economy: What It Is, Types of Economies, Economic Indicators - investopedia.com
- Market Economy: Definition & Characteristics | Vaia - vaia.com
- 2.101 Definitions. - Acquisition.GOV - acquisition.gov
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