Which of the following illustrates what happens when supply and demand work as they should, according to Adam Smith? (1 point) There is enough supply of a given product to meet consumer demands. Consumers make companies create new types of products. Governments open new factories to meet demand for goods. 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 option that illustrates what happens when supply and demand work as they should, according to Adam Smith, is:
1. There is enough supply of a given product to meet consumer demands.
According to Adam Smith's theory of supply and demand, the situation that illustrates how they work as they should is when there is enough supply of a given product to meet consumer demands. This means that the quantity of the product available in the market matches the quantity that consumers are willing and able to purchase.
To determine which of the given options aligns with Adam Smith's view, we need to evaluate each one:
1. There is enough supply of a given product to meet consumer demands: This option reflects the ideal outcome according to Adam Smith's theory. When the supply matches consumer demand, it leads to equilibrium in the market and efficient allocation of resources.
2. Consumers make companies create new types of products: While consumer demand can influence companies to innovate and create new products, it is not necessarily an indication of the functioning of supply and demand. This option does not directly address the concept of supply and demand working as they should.
3. Governments open new factories to meet demand for goods: This option involves government intervention and does not specifically relate to the dynamics of supply and demand in a free market, as advocated by Adam Smith. In a free market, the allocation of resources is primarily driven by supply and demand rather than government intervention.
4. Companies make more of a product even though few people buy it: This option contradicts the principles of supply and demand since it implies an oversupply of a product. In a market guided by Adam Smith's theory, companies would respond to low demand by reducing production rather than increasing it.
Based on the above evaluation, the option that illustrates what happens when supply and demand work as they should, according to Adam Smith, is: "There is enough supply of a given product to meet consumer demands."