Which phrase BEST completes the diagram? E. 2.1 Distribution of Goods in a Free Enterprise System Price increases Unemployment decreases

To determine the phrase that best completes the diagram, we need to understand the cycle depicted by the quadrilaterals and how they relate to each other in the context of a free enterprise system. Let's analyze the cycle step by step:1. The top quadrilateral states "Consumer demand increases." When consumer demand for goods and services increases, businesses typically respond by producing more to meet this demand.2. The bottom quadrilateral states "Production increases." As production increases to meet the higher consumer demand, businesses may need to hire more workers, purchase more materials, and possibly raise prices due to higher demand and potentially higher costs of production.3. The right quadrilateral states "Supply decreases." This part of the cycle seems counterintuitive because if production increases, we would expect supply to increase as well, not decrease. However, if we consider that the supply decrease refers to a relative decrease in the available supply compared to the demand (i.e., demand outstripping supply), then it could lead to the next step in the cycle.4. The left quadrilateral states "Price decreases." This is also counterintuitive because typically, if demand is high and supply is low (or not increasing as fast as demand), prices would tend to increase, not decrease.Given the inconsistencies in the cycle (specifically with the "Supply decreases" and "Price decreases" quadrilaterals), we need to choose the phrase that would best correct the cycle and make it logically consistent.The options are:A. Price increasesB. Unemployment decreasesC. Consumer demand decreasesD. Government regulation increasesThe correct phrase that would make the cycle logically consistent, considering the increase in consumer demand and production, would be "Price increases." This is because when demand increases and supply cannot keep up, prices typically go up.Therefore, the phrase that BEST completes the diagram is:A. Price increasesThis phrase corrects the cycle by replacing "Price decreases" with "Price increases," which aligns with the economic principle that when demand exceeds supply, prices tend to rise.