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Question

In a market economy 

A demand determines supply and supply, in turn, determines prices Correct Answer Incorrect Answer
B supply determines demand and demand, in turn, determines prices Correct Answer Incorrect Answer
C supply and demand determine prices and prices, in turn, allocate the economy’s scarce resources Correct Answer Incorrect Answer
D the allocation of scarce resources determines prices and prices, in turn, determine supply and demand Correct Answer Incorrect Answer
E none of these Correct Answer Incorrect Answer

Solution

In a market economy, forces of market interact (demand and supply) to determine prices and prices in turn allocate the economy’s scarce resources.

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