What is meant by consumer sovereignty?

Consumer sovereignty refers to the idea that consumers ultimately dictate what is produced in an economy through their purchasing choices and preferences. When consumers express their desires for certain products by buying them, businesses respond by producing more of those goods. This dynamic creates a market where the types of goods produced align with consumer needs and wants, highlighting the powerful role of consumers in shaping the economy.

In this context, the correct answer accurately captures the essence of consumer sovereignty, emphasizing that it is the preferences and spending habits of consumers that drive production decisions. This theory underscores the importance of consumer choice in a market economy, where businesses strive to satisfy the demands of their customers to remain competitive.