What is consumer sovereignty?

• A. It is the dictation of prices by producers
• B. It reflects consumers' ability to determine production based on their preferences
• C. It indicates government control over consumer choices
• D. It limits consumer power in the market

Answer: (B)

Consumer sovereignty refers to the concept that consumer preferences and choices drive the production of goods and services in a market economy. This principle highlights the idea that when consumers express their desires through purchasing decisions, producers respond by adapting their offerings to meet those demands. Essentially, it places consumers in a powerful position where their tastes directly influence what is produced and how resources are allocated in the economy.

In a free-market system, if many consumers choose a particular product, businesses will likely increase production of that product to meet demand. Conversely, if a product isn't popular or desired, producers will decrease its availability or stop making it altogether. This dynamic ensures that what is offered in the market reflects the wants and needs of the consumers, reinforcing the principle of consumer sovereignty.