In a Market System, What Must Take Place for Quantity

question 101

Multiple Choice

In a market system, what must take place for quantity demanded to continually be equated with quantity supplied?

• A) Price controls must be applied by governments.
• B) Relative prices must be able to adjust to market clearing levels.
• C) Tastes and preferences of consumers must adjust to eliminate surpluses or shortages.
• D) Businesses must engage in involuntary, unprofitable exchanges to eliminate surpluses or shortages.

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Definitions:

Conservatism

A principle in accounting that recommends erring on the side of caution and underestimating rather than overestimating profits and values.

New Evidence

Recent information or data that offering fresh insights, usually changing or confirming existing understandings.

Behavioral Finance

A field of finance that proposes psychology-based theories to explain stock market anomalies and investing behaviors.

Security Prices

The cost at which securities, such as stocks or bonds, are bought and sold in the market, determined by supply and demand dynamics.