In a competitive market, how is the distribution of goods and services determined?

• A. By producers deciding who receives goods and services
• B. By random assignment to consumers
• C. By government allocation based on social priorities
• D. By the interaction of supply and demand through the price mechanism

Answer: (D)

Verified step by step guidance

1. Understand that in a competitive market, the distribution of goods and services is not decided by producers, random assignment, or government allocation, but rather through market forces.
2. Recall the fundamental concept of supply and demand: producers supply goods and services, and consumers demand them, each responding to prices.
3. Recognize that the price mechanism acts as a signal and incentive, balancing the quantity supplied and demanded at an equilibrium price.
4. At this equilibrium price, goods and services are allocated efficiently to those consumers who value them most and are willing to pay the market price.
5. Therefore, the distribution is determined by the interaction of supply and demand through the price mechanism, which coordinates decisions of buyers and sellers.