Given below are two statements:
Statement I: In a market system, the price of a good reflects, on an average, the society’s valuation of the good.
Statement II: When buyers demand more of a good, the rise in its price signals to producers that society wants less of the good.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Statement I is true but Statement II is false.
Statement I: In a market system, the price of a good reflects, on an average, the society’s valuation of the good. — True. Price shows how much society as a whole values the good.
Statement II: When buyers demand more of a good, the rise in its price signals to producers that society wants less of the good. — False. A rise in price signals that society wants more of the good, so producers are likely to raise production.
NCERT (2026-27): “1.3.2 The Market Economy … In a market system, all goods or services come with a price (which is mutually agreed upon by the buyers and sellers) at which the exchanges take place. The price reflects, on an average, the society’s valuation of the good or service in question. If the buyers demand more of a certain good, the price of that good will rise. This signals to the producers of that good that the society as a whole wants more of that good than is currently being produced and the producers of the good, in their turn, are likely to increase their production.” |