Who determines the price and quantity traded in a market? buyers and sellers buyers prices and quantities traded are not generally determined in markets sellers
The Correct Answer and Explanation is:
The correct answer is: buyers and sellers
Explanation
In a market economy, the price and quantity of goods and services traded are determined by the interaction between buyers and sellers. This interaction is governed by the fundamental principles of supply and demand. Buyers represent the demand side, while sellers represent the supply side. The point at which the quantity demanded equals the quantity supplied is known as the market equilibrium. At this point, the price is stable, and the quantity traded is optimal for both parties.
Buyers influence the market through their willingness and ability to purchase goods at various prices. According to the law of demand, as the price of a good falls, the quantity demanded generally rises, assuming all other factors remain constant. Buyers’ preferences, income levels, and expectations about future prices also play a role in shaping demand.
Sellers, on the other hand, determine how much of a good or service they are willing to offer at different prices. The law of supply states that as the price of a good rises, the quantity supplied typically increases. This is because higher prices can cover production costs and offer greater profit incentives. Factors such as production technology, input costs, and government regulations can influence the supply side.
The market price and quantity traded emerge from the continuous negotiation between buyers and sellers. If the price is too high, excess supply results, leading sellers to lower prices. If the price is too low, excess demand causes buyers to bid prices up. This dynamic process continues until equilibrium is reached.
Therefore, neither buyers nor sellers alone determine market outcomes. It is the interaction between the two that sets the price and quantity traded. This decentralized decision-making process is a hallmark of market economies and ensures that resources are allocated efficiently based on collective preferences and constraints.
