4. CHARACTERISTICS OF THE CAPITALIST SYSTEM

Question 1

What determines the prices of goods and services in free market economies?

Answer 1

The law of supply and demand

Prices increase when demand is high and decrease when supply exceeds demand.

Question 2

What happens to prices when many people want a product?

Answer 2

Prices go up

This is a key principle of the law of supply and demand.

Question 3

What is free competition?

Answer 3

Any business can compete in the market to sell any product or service

This characteristic allows for a diverse marketplace.

Question 4

How do businesses use advertising?

Answer 4

To make people want to buy their products

Advertising plays a crucial role in influencing consumer behavior.

Question 5

What are shares?

Answer 5

Small parts of a company

Businesses sell shares to raise money for growth.

Question 6

What is the stock market?

Answer 6

Where people buy and sell parts of companies (called shares)

The stock market helps companies get money for their projects.

Question 7

Fill in the blank: The law of supply and demand determines the _______ of goods and services.

Answer 7

prices

Question 8

True or False: In a capitalist system, prices are fixed and do not change.

Answer 8

False

Prices fluctuate based on supply and demand.