The rationing function of prices means that
A) government is responsible for setting the prices of basic foods.
B) all goods and services are produced by large firms.
C) businesses determine what goods consumers should purchase.
D) buyers and sellers synchronize their decisions through the price system.

Question

Quizplus · Accepted Answer

The rationing function of prices refers to how the price system works as a way for buyers and sellers to coordinate their decisions. In a market economy, prices serve to allocate scarce resources among competing uses, such that those who value a good or service the most are willing to pay the highest price for it. This encourages producers to supply more of the good, and consumers to use it more sparingly, resulting in a more efficient allocation of resources.

The Rationing Function of Prices Means That