which of the following illustrates what happens when supply and demand work as they should, according to Adam Smith

Answer 1

- The price of a particular good increases when demand exceeds supply, leading to a decrease in demand and an increase in supply until equilibrium is reached.

This scenario illustrates the concept of supply and demand working as they should according to Adam Smith's theory of laissez-faire economics. In this situation, the market automatically adjusts by increasing the price of the good in response to excess demand. This higher price incentivizes suppliers to produce more of the good, increasing the supply. Eventually, the increased supply and higher price will lead to a decrease in demand until a state of equilibrium is achieved, where the quantity demanded equals the quantity supplied. According to Adam Smith, this dynamic process allows the market to efficiently allocate resources without the need for government intervention.