Which of the following illustrates what happens when supply and demand work as they should, according to Adam Smith? (1 point)
Responses
Governments open new factories to meet demand for goods.
Governments open new factories to meet demand for goods.
There is enough supply of a given product to meet consumer demands.
There is enough supply of a given product to meet consumer demands.
Consumers make companies create new types of products.
Consumers make companies create new types of products.
Companies make more of a product even though few people buy it.
There is enough supply of a given product to meet consumer demands.
The correct response is:
There is enough supply of a given product to meet consumer demands.
The correct answer is: "There is enough supply of a given product to meet consumer demands."
To understand why this is the correct answer according to Adam Smith's perspective, let's take a closer look at his economic theory. Adam Smith is known as the father of modern economics and his ideas form the basis of classical economics.
According to Smith, in a free market, the forces of supply and demand interact to determine the price and quantity of goods and services. When supply and demand work as they should, a balance is achieved where the quantity of goods produced (supply) matches the quantity of goods consumers want to buy (demand).
In this context, the answer choice "There is enough supply of a given product to meet consumer demands" aligns with Adam Smith's perspective. It reflects a situation where the market mechanism is functioning efficiently, with producers responding to consumer demands by supplying enough goods to meet that demand.
The other answer choices do not accurately represent what Adam Smith would expect. The first answer choice regarding governments opening new factories contradicts Smith's emphasis on free markets and the role of self-interest and competition. The third answer choice emphasizes consumers' influence on companies, but it does not explicitly reflect the relationship between supply and demand. The fourth answer choice about companies making more of a product despite low demand does not demonstrate the market working as it should, as it goes against the principle of supply adapting to meet demand.
In summary, according to Adam Smith's perspective, the illustration that aligns with how supply and demand should work is when there is enough supply of a given product to meet consumer demands.