The concept that people may decide what to buy and sell is known as consumer sovereignty. This principle suggests that consumers have the ultimate power in the market because their preferences and choices determine what goods and services are produced and sold.
In a market economy, businesses produce goods and services based on consumer demand. When consumers prefer certain products over others, businesses respond by increasing the production of those favored items. Conversely, if a product is not in demand, businesses may reduce its production or stop producing it altogether. This dynamic interaction between consumer preferences and business production decisions drives the market.
Consumer sovereignty is a fundamental aspect of a free-market economy. It emphasizes the importance of individual choice and competition among businesses to meet consumer needs and desires. This concept ensures that the market remains responsive to the changing preferences of consumers, leading to a more efficient allocation of resources.