In the price system, how are producers and consumers equally involved in determining market prices?

• A. Neither producers nor consumers influence prices; prices are set by government regulation.
• B. Consumers determine prices by choosing what they are willing to pay, and producers must accept these prices.
• C. Both producers and consumers interact in markets, with producers supplying goods and consumers demanding them, and their decisions together set the equilibrium price.
• D. Producers set prices independently, while consumers only decide whether to buy at those prices.

Answer: (C)

Verified step by step guidance

1. Understand that in a price system, market prices are determined through the interaction of supply and demand.
2. Recognize that producers decide how much of a good to supply at various prices, which forms the supply curve.
3. Recognize that consumers decide how much of a good to buy at various prices, which forms the demand curve.
4. Identify the equilibrium price as the price at which the quantity supplied by producers equals the quantity demanded by consumers.
5. Conclude that both producers and consumers are equally involved in determining market prices because their combined decisions establish the equilibrium price where the market clears.