In a market system,resources are allocated by

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In a market system, resources are allocated by prices. The price system coordinates the decisions of millions of households and firms as they interact in markets to determine the allocation of scarce resources. Prices serve as signals to both producers and consumers, guiding them in their consumption and production decisions. As prices rise, consumers tend to buy less of a good or service, while producers tend to produce more. Conversely, as prices fall, consumers tend to buy more, while producers tend to produce less. This constant balancing act determines the allocation of resources in the economy.

In a Market System,resources Are Allocated by