lain Your Answer.
This statement is false. The reason that the statement is false is that the forces of supply and demand are incorporated into the price system in a market economy.
Price reflects the equilibrium point (or intersection) of the demand and supply for a product. Price is defined as the quantity of money that must be exchanged for one unit of a good or service. A price system is a process of resource allocation in an economy. The American economy is, in general terms, a free market economy. In a free market economy, prices are determined in the market by the forces of supply and demand, without government intervention·for the most part (Mastrianna & Hailstones, 1995).
A theoretical concept associated with the use of prices in a free market economy is equilibrium. A free market economy is said to be in equilibrium when the independently taken decisions of households and firms are compatible. To achieve this equilibrium, prices must be set at a level such that the total demand for any good is equal to the amount of that good that is initially available, plus the amount of it produced. Implicit in the concept of equilibrium is another theoretical function of prices in a free market economy: the current price levels in a free market economy are those that are expected to clear current markets.
Overall, demand is defined as a schedule of the total quantities of a good or service that purchasers will buy at different prices at a given time. Air transportation is a product that is subject to demand by consumers. Supply, in economic theory, is defined as the total quantity of a product that sellers are prepared to offer to consumers at different prices over a given period (Mastrianna & Hailstones, 1995).
3. Explain How the Consumer Price Index (CPI) Is Calculated.
Inflation is a process of steadily rising prices that results in a steadily diminishing purchasing power for a specified nominal amount of m...