What principle suggests that businesses must produce goods and services that consumers are willing and able to buy?

The principle of consumer sovereignty dictates that the desires and preferences of consumers should guide the production of goods and services in an economy. This concept asserts that businesses thrive when they make products that align with what consumers want and are willing to purchase. Essentially, it emphasizes that the consumer’s choices ultimately shape the market; if consumers are unwilling or unable to buy a product, no matter how well it is produced, the business will not succeed in the long term.

In contrast, while market demand reflects the overall desire of consumers for a specific product, it does not inherently state that businesses must adapt to consumer preferences. Market equilibrium pertains to the balance between supply and demand but does not emphasize consumer preferences. Supply chain management focuses on the logistics of producing and delivering products, rather than the alignment of production with consumer desires. Thus, consumer sovereignty is the principle that emphasizes the necessity for businesses to tailor their offerings based on consumer willingness and ability to buy.