How does creating increased competition, such as free trade zones, impact supply and demand?
A. The price of goods goes up due to an increase in supply
B. The price of goods goes up due to a decrease in demand.
C. The price of goods goes down due to an increase in demand.
D. The price of goods goes down due to an increase in supply.
I'm very confused on this but I know the answer isn't B. Please help.
Competition doesn't increase demand. What does increase?
A increase in demand, correct? The way the answer choices are said confuses me a lot and I'm not sure which one even fits that.
Is it A? That's the only thing that I believe it can be, due to the others not making any sense.
Competition doesn't increase demand. What does increase?
A increase in supply
Yes, the supply increases.
Thank you a lot. Also sorry, I misread what you said the first time and responded mislead. Thought it said something else but thank you.
You're welcome.
To understand how creating increased competition, such as free trade zones, impacts supply and demand, let's break down the question and the options.
Supply and demand are fundamental concepts in economics that describe the relationship between the availability of goods or services (supply) and the desire or need for those goods or services (demand).
Creating increased competition, like free trade zones, can impact supply and demand as follows:
1. In a free trade zone, barriers to trade, such as tariffs or quotas, are reduced or eliminated, allowing businesses from different countries to compete more freely. This increased competition can lead to an increase in the supply of goods available in the market.
2. When the supply of goods increases, there is a higher quantity available for consumers, which can potentially lead to a decrease in price due to the competition between suppliers. This means that option D, "The price of goods goes down due to an increase in supply," is a possible outcome.
So, the correct answer would be D: The price of goods goes down due to an increase in supply.
It's important to note that the impact on supply and demand can vary depending on other factors such as the elasticity of demand, cost structures, and market conditions. However, in the context of increased competition resulting from free trade zones, a decrease in prices due to an increase in supply is a likely outcome.