When supply exceeds demand, sellers must lower prices to stimulate sales, when demand exceeds supply, prices increase as buyers compete to buy goods. What this theory is called in economics?
Correct answer: B. Supply and Demand theory
- A. Cost push theory
- B. Supply and Demand theory
- C. Fundamental theory
- D. Ricardo's theory
Explanation
The supply-and-demand theory explains price adjustment: excess supply puts downward pressure on prices, while excess demand creates upward pressure. Cost-push theory explains inflation from rising production costs, not this general market mechanism.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,742 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Microeconomics questions
The mark is imposed on goods or wrappers to show that the articles bearing this mark belong to a particular trader. What is this mark called ?
Estimated value that is added to a product or material to each stage, of its manufacture or distribution, is known as ?
An outside professional conducts an examination of company's accounting records in order to determine whether the company is maintaining records according to the generally accepted accounting principles. What this examination is called ?
A share or an interest in an enterprise, especially a financial share, is called ?
A payment is made in return for some transference of privilege. What this payment is called ?
By the way of an underwriter, the sale of a new security is issued to the public a transaction that must be registered with the securities and exchange commission. How is know this process ?