ACCA Advanced Performance Management (APM) 2025 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 400

What does the term "consumer sovereignty" indicate in a market economy?

The producer controls the market

The consumer decides on the production of goods

The term "consumer sovereignty" in a market economy refers to the idea that consumers hold the power to dictate what goods and services are produced based on their preferences and purchasing decisions. When consumers spend their money on certain products, they signal to producers what to create more of, thus guiding the allocation of resources in the economy. This principle highlights the role of consumer demand in influencing production choices, establishing that the ultimate authority in determining the types and quantities of goods available rests with the consumers.

In contrast, the other options do not accurately capture this concept. The idea that producers or the government control the market or that central planning takes precedence contradicts the fundamental tenet of consumer sovereignty, which posits that consumers ultimately exercise their preferences through their purchasing behavior.

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The government is the main decision maker

The economy is run by central planning

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