What principle represents the idea that consumer preferences drive production decisions?

• A. Consumer sovereignty
• B. Government regulation
• C. Market competition
• D. Supply and demand

Answer: (A)

Consumer sovereignty is the principle that emphasizes the role of consumer preferences in shaping what goods and services are produced in an economy. It reflects the notion that in a market economy, consumers have the power to influence production through their buying decisions. When consumers express their preferences by choosing certain products over others, businesses respond by reallocating resources to meet that demand, thereby driving production decisions.

This principle ensures that producers must be attentive to what consumers want, leading to innovation and improvement in quality as companies strive to attract buyers. Ultimately, consumer sovereignty underlines the importance of consumer choice and behavior in the free enterprise system, reinforcing the idea that the market operates effectively when it aligns with the desires and needs of consumers.