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What does the market price depend on in a free market?

A. Supply and demand
B. The government negotiating the price with consumers


Sagot :

Final answer:

In free markets, prices are determined by the relationship between demand and supply, acting as a mechanism for information transmission between buyers and sellers.


Explanation:

Prices in free markets depend on the relationship between demand and supply. In a market-oriented economy, prices act as a mechanism for transmitting information between buyers and sellers.

  1. Consumers react based on their preferences and budget set.
  2. Producers adjust based on the impact on expected profits.
  3. No government oversight guides the responses to price changes.

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