Which of the following is a key factor in determining the allocation of resource

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Question: Which of the following is a key factor in determining the allocation of resources in a market economy? (2023)

Options:

Correct Answer: Consumer preferences and demand.

Exam Year: 2023

Solution:

In a market economy, consumer preferences and demand are key factors in determining resource allocation, thus option 1 is correct.

Which of the following is a key factor in determining the allocation of resources in a market economy? (2023)

Which of the following is a key factor in determining the allocation of resources in a market economy? (2023)

Step 1: Understand what a market economy is. A market economy is a system where resources are allocated based on supply and demand.
Step 2: Identify what 'resource allocation' means. Resource allocation refers to how resources like money, labor, and materials are distributed to produce goods and services.
Step 3: Recognize the role of consumer preferences. In a market economy, what consumers want (their preferences) influences what products are made.
Step 4: Understand demand. Demand is how much of a product consumers want at a given price. Higher demand usually means more resources are allocated to produce that product.
Step 5: Conclude that consumer preferences and demand are key factors in deciding how resources are used in a market economy.

No concepts available.