A market price contains no more information about a good than a good social planner would be able to obtain.

Question

Quizplus · Accepted Answer

While market prices do reflect information about supply and demand for a good, they do not necessarily reveal all of the information a social planner would need to make decisions about allocating resources. Social planners would also need information about externalities, public goods, and other factors that may not be fully reflected in market prices.

A Market Price Contains No More Information About a Good