Which of the following statements about markets and prices is correct?
A) In a market system, buyers and sellers must be in face-to-face contact with each other.
B) Prices affect the distribution of goods in a market system, but not the allocation of resources.
C) In a market system, prices serve to ration goods and services to consumers.
D) The operation of a market system has little, if any, effect on the distribution of income in the economy.

Question

Quizplus · Accepted Answer

Prices serve to ration goods and services to consumers in a market system. Prices serve as signals to consumers and producers about the availability of goods and services. Higher prices indicate that a good or service is more scarce, while lower prices indicate that it is more abundant. This rationing effect helps ensure that goods and services are distributed to those who are willing and able to pay for them, giving buyers an incentive to conserve scarce resources and giving producers an incentive to produce and deliver more goods to the market.

Which of the Following Statements About Markets and Prices Is