In the context of market equilibrium, how is the value (market price) of a product determined?

• A. By the interaction of supply and demand in the market
• B. By the preferences of a single consumer
• C. By the production cost alone
• D. By government regulation only

Answer: (A)

Verified step by step guidance

1. Understand that market equilibrium occurs where the quantity of a product demanded by consumers equals the quantity supplied by producers.
2. Recognize that the demand curve represents consumers' willingness to buy a product at different prices, while the supply curve represents producers' willingness to sell at different prices.
3. Identify the market price as the price at which the demand curve and supply curve intersect, meaning the quantity demanded equals the quantity supplied.
4. Note that this price is determined by the interaction of all consumers' preferences and producers' costs collectively, not by a single consumer or production cost alone.
5. Acknowledge that while government regulation can influence prices, the fundamental market price in equilibrium is set by the balance of supply and demand.