The rationing function of prices refers to the

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The rationing function of prices is the capacity of a competitive market to balance the quantity demanded and quantity supplied of a product by adjusting the price. As the price of a product rises, the quantity demanded decreases and the quantity supplied increases, resulting in a balance between the two. Conversely, as the price falls, the quantity demanded increases and the quantity supplied decreases, resulting in the same balance. Therefore, market prices act as a mechanism for rationing scarce resources and coordinating economic activity without centralized planning.

The Rationing Function of Prices Refers to the