Question

43. In Smith’s analysis, effectual demand is the demand of buyers who are willing to a....

43. In Smith’s analysis, effectual demand is the demand of buyers who are willing to
a. pay the natural price.
b. pay the nominal price.
c. pay the market price.
d. pay the real price.

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Answer #1

The answer is A) Natural Price.

A) Natural price is the price that is enough only cover the cost of production of the product.

B) The nominal price is the price that is adjusted for inflation. It may not reflect the actual cost of production. This may consider the inflationary or deflationary effects ongoing in the economy.

C) The market price is the price that is determined by the market forces of demand and supply and will reflect the price at which the producers and consumers find it profitable enough to make the trade.

D) The real price is the nominal price divided by the price level. It is not an accurate measure of the cost of production only.

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