Which of the below statement is correct?

Question

Which of the below statement is correct?

1. A. Microeconomics is primarily concerned with the overall economy.
2. B. Individual markets are the focus of macroeconomics.
3. C. Governments do not have any control over market prices.
4. D. When economists study a market's price, their main goal is to figure out why the price is what it is and how it might change. (Correct answer)

Correct Answer

Option D — When economists study a market''s price, their main goal is to figure out why the price is what it is and how it might change.

Detailed Solution & Explanation

The correct answer is When economists study a market''s price, their main goal is to figure out why the price is what it is and how it might change..

Key Points

• When economists study a market price, their primary goal is to understand why the price is at its current level and how/why it might change — not just to describe it.

Additional Information

• Economics is largely the study of how price is determined and how it responds to changes in supply and demand.
• Positive economics describes what is; normative economics prescribes what ought to be. Explaining why a price is what it is belongs to the former.
• Price in a competitive market settles at equilibrium, where quantity demanded equals quantity supplied; a shift in either curve moves it.
• Price also carries information and rations scarce goods — the price mechanism that Adam Smith described as the invisible hand.