Which of the following statements about a price system is TRUE? I. Prices ration goods and services.
II) Prices indicate relative scarcity.
A) I only
B) II only
C) Both I and II
D) Neither I nor II

Question

Quizplus · Accepted Answer

Both statement I and statement II are true about the price system. Prices serve as an effective tool for rationing goods and services when there is a shortage because consumers are willing to pay higher prices to obtain a scarce good. Additionally, prices indicate relative scarcity because goods and services that are more abundant and less in demand will have lower prices, while goods and services that are scarcer and more in demand will have higher prices.

Which of the Following Statements About a Price System Is