Which of the following best explains how market demand relates to consumers' needs and wants?

• A. Market demand reflects the total quantity of a good that consumers are willing and able to purchase at various prices, based on their needs and wants.
• B. Market demand only considers consumers' needs and ignores their wants.
• C. Market demand is unrelated to consumers' willingness to pay for goods and services.
• D. Market demand is determined solely by the production costs of firms, not by consumers' preferences.

Answer: (A)

Verified step by step guidance

1. Understand the concept of market demand: Market demand represents the total quantity of a good or service that all consumers in a market are willing and able to purchase at different price levels.
2. Recognize the role of consumers' needs and wants: Consumers' needs are essential requirements, while wants are desires that influence their purchasing decisions. Both affect how much of a product consumers demand.
3. Connect willingness and ability to purchase: Market demand depends on consumers not only wanting a product but also having the financial means (ability) to buy it at various prices.
4. Analyze the incorrect options: Market demand does not ignore wants, is directly related to consumers' willingness to pay, and is not determined solely by production costs but by consumer preferences and purchasing power.
5. Conclude that market demand reflects the combined effect of consumers' needs, wants, willingness, and ability to pay across different prices, which determines the total quantity demanded in the market.