Paper 1 · Economic Systems
Which of the following is an advantage of free market economy?
Aunderpricing leading to an over consumption of goods and services
Bproduction is characterized by increasing returns
Cconsumer preferences are reflected in the pattern of production
Ddecisions are taken on the basis of social cost and benefits
Explanation: This is the principle of consumer sovereignty. In a free market the pattern of consumer spending signals to producers what to produce, so production follows consumer preferences.
ZIMSEC Economics 6073/1 Paper 1, November 2019, Q1