Which best explains how a free-market system has a circular flow of influences? Consumer decisions affect producers, and producer decisions affect consumers.

Which of the following best explains why the free-market system follows a circular flow model? A. The free choices made by consumers and producers influence each other. Profits flow in a circular way back and forth between consumers and producers.

Answer: The statement that best explains how a free-market system has a circular flow of influences is that consumer decisions affect producers, and producer decisions affect consumers.

The free market is an economic system based on supply and demand with little or no government control. Free markets are characterized by a spontaneous and decentralized order of arrangements through which individuals make economic decisions.

What are the three main goals of a socialist economic system? A planned economy, greater equality, and ownership of income-producing property by the state rather than private parties.

Why are rules protecting private property some of the most important rules in a free-market system? – Consumers all desire to own as much property as they can. – Private property protects from unnecessary government control. – Producers want to protect the profit they make by selling property to consumers.

Rules protecting private property are some of the most important rules in a free market system, because people need to own resources or assets in order to make free choices.

In its role as rule maker, government makes and enforces laws governing the conditions under which voluntary transactions are made. These laws are designed to protect the rights to private property and individual freedom and to preserve and promote competition.

The Goals of a Business. The primary purpose of a business is to maximize profits for its owners or stakeholders while maintaining corporate social responsibility.

Advantages Of A Free Market Economy

• Consumer Sovereignty. In a free market, producers are incentivized to produce what consumers want at a reasonable and affordable price.
• Absence of Bureaucracy.
• Motivational Influence of Free Enterprise.
• Optimal Allocation of Resources.
• Poor Quality.
• Merit Goods.
• Excessive Power of Firms.

What roles do prices play in a free market economy? – In a free market economy, prices are used to distribute goods and resources throughout the economy. Prices provide a standard of measure of value throughout the world. – Prices act as a signal that tells producers and consumers how to adjust.

Prices have three seperate functions: rationing, signalling and incentive functions. These ensure collectively that resources are allocated correctly by co-ordinating the buying and selling decisions in the market.

Types of Pricing Method: Cost-Plus Pricing- In this pricing, the manufacturer calculates the cost of production sustained and includes a fixed percentage (also known as mark up) to obtain the selling price. The mark up of profit is evaluated on the total cost (fixed and variable cost).

7 best pricing strategy examples

• Price skimming. When you use a price skimming strategy, you’re launching a new product or service at a high price point, before gradually lowering your prices over time.
• Penetration pricing.
• Competitive pricing.
• Premium pricing.
• Loss leader pricing.
• Psychological pricing.
• Value pricing.