3.1.2.5 Understanding Free Markets and Equilibrium

What is a free market?

• A market with government intervention

• A market without government intervention

• A market with only digital platforms

• A market with only physical shops

What does equilibrium in a market mean?

• There is no demand

• Demand is greater than supply

• Supply is greater than demand

• Demand equals supply

What is another term for equilibrium?

• Market imbalance

• Market shortage

• Market surplus

• Market clearing position

Who is considered the godfather of market economics?

• David Ricardo

• Adam Smith

• Milton Friedman

• John Maynard Keynes

What does allocative efficiency mean?

• Resources are not used at all

• Resources are used inefficiently

• Resources perfectly follow consumer demand

• Resources are wasted

What is another name for the free market?

• Supply mechanism

• Resource mechanism

• Price mechanism

• Demand mechanism

What does the 'RC' in price mechanism stand for?

• Ration and Compete

• Ration and Consume

• Ration and Conserve

• Ration and Control

What happens when there is excess demand in a market?

• Prices fall

• Prices rise

• Supply increases

• Demand decreases

What is another name for excess demand?

• Surplus

• Shortage

• Equilibrium

• Allocative efficiency

What is the result of higher prices due to excess demand?

• Increase in demand

• Decrease in prices

• Increase in supply

• Decrease in supply