Which of the following best describes market saturation in economics?

• A. A period when new firms are entering the market and competition is increasing
• B. A situation where the demand for a product is fully met and additional supply does not increase sales
• C. A scenario in which producers are unable to meet consumer demand
• D. A market condition where prices are rising due to increased demand

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of market saturation. Market saturation occurs when the demand for a product is fully met by the existing supply, meaning that adding more supply will not increase sales significantly.
2. Step 2: Analyze each option by comparing it to the definition of market saturation. For example, consider whether the option describes a situation where demand is fully met or if it describes other market conditions like increasing competition or rising prices.
3. Step 3: Identify that 'A period when new firms are entering the market and competition is increasing' describes market entry and competition, not saturation.
4. Step 4: Recognize that 'A scenario in which producers are unable to meet consumer demand' describes a shortage or excess demand, which is the opposite of saturation.
5. Step 5: Note that 'A market condition where prices are rising due to increased demand' describes inflationary pressure or demand-pull inflation, not saturation. Therefore, the best description is the option stating that demand is fully met and additional supply does not increase sales.