Where Price Comes From
Written by Studio AM.
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Sellers choose prices, but supply and demand influence what buyers will pay. Supply is the amount sellers offer. Demand is the amount buyers are willing and able to buy at a given price.
When more people want a product and supply stays limited, the price may rise. When demand falls but supply stays the same, sellers may lower the price to attract buyers. Prices emerge from these decisions and other conditions, such as costs and competition. In a simple market model, balance occurs at a price where the amount offered matches the amount buyers want to purchase.
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Questions
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Question 1 of 4
What is the passage mainly about?
The answer is B: How supply and demand influence prices
The passage explains that price emerges from the interaction of supply and demand.
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Question 2 of 4
If fewer people want umbrellas and the number offered stays the same, what might happen?
The answer is B: Sellers may lower prices to attract buyers.
The example keeps supply unchanged while demand falls. The passage says sellers may respond by lowering prices.
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Question 3 of 4
In the passage, 'emerge' most nearly means
The answer is B: come into being from something
Prices emerge, or arise, from decisions made under market conditions.
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Question 4 of 4
What may happen when more people want a product and supply stays limited?
The answer is A: The price may rise.
The second paragraph says the price may rise under these conditions.
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