The guiding function of prices tends to keep resources ﬂowing toward their most highly valued uses.

Question

Quizplus · Accepted Answer

Prices serve as signals for producers and consumers. In a market economy, prices reflect the relative scarcity and demand for goods and services. As prices rise, producers receive a signal to increase supply and consumers receive a signal to decrease demand. This helps ensure that resources are allocated to their most highly valued uses.

The Guiding Function of Prices Tends to Keep Resources ﬂOwing