What principle states that the price of a product will equal the value where supply meets demand in free competition?

The principle that articulates how the price of a product will equal the value where supply meets demand in a competitive market is known as the Law of Supply and Demand. This fundamental economic concept illustrates that when the quantity of a product supplied matches the quantity of a product demanded, the market reaches an equilibrium price.

When demand for a product increases or decreases, the equilibrium price will adjust accordingly, reflecting changes in consumer behavior or market conditions. Conversely, if the supply of a product increases or decreases while demand remains constant, the price will also adjust to restore balance in the market dynamics.

This principle is essential for understanding how market economies function, as it helps predict pricing trends based on fluctuations in supply and demand.

The other options focus on different aspects of economics; for instance, the Law of Demand specifically addresses how consumer purchasing behavior tends to decrease as the price of a good rises, while the Law of Supply deals with producers’ willingness to sell at various price points. The Law of Diminishing Returns, on the other hand, pertains to production levels and efficiency rather than market pricing, making them relevant but distinct from the overall concept of price determination in competitive markets.