Relative price changes are a desirable and essential ingredient of the market mechanism.

Question

Quizplus · Accepted Answer

Relative price changes help to allocate resources efficiently in the market mechanism by signaling changes in supply and demand. This allows market participants to make informed decisions about production, consumption, and investment, leading to a more efficient allocation of resources. Without relative price changes, markets would struggle to efficiently allocate resources and there may be shortages, surpluses, and other distortions in supply and demand.

Relative Price Changes Are a Desirable and Essential Ingredient of the Market