Description
Why supply and demand is considered as factors that make market economies work?
Explanation & Answer
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The interaction between market demand and supply determines the
equilibrium or market price (where demand equals supply). Shifts in the
demand curve and/or the supply curve lead to changes in the equilibrium
price. The market price and the price mechanism play crucial roles in the
capitalist system—they send signals to both producers and
consumers. The price mechanism is an integral part of the study of market
structures that constitute the bulk of microeconomic theory.
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