Question

The adjustment of the market following a change in either supply or demand is an example of _____________.

a.	unemployed resources	b.	allocative efficiency
c.	hierarchy	d.	spontaneous order

What is a supported price?

a.	An administrative attempt to establish a price higher than the market price	b.	An administrative attempt to establish a price lower than the market price
c.	A market-driven attempt to establish a price that equalizes demand and supply	d.	A market-driven attempt to establish a price that is higher than the regular price

Answer 1

After a change in supply or demand, the market forces work to ensure allocative efficiency till the next equilibirum is reached. Resources are adjusted with the changing forces of supply and demand till they are allocated in the most efficient way possible. Thus, option b) is correct.

Supported price is an administrative attempt to keep the price higher than the competitive market price through price control or subsidies. This is done typically for agricultural goods to ensure poor farmers get proper returns. Thus, option a) is correct,