Prices in a market economy perform a rationing function because they reflect
A) the demand of all buyers in the market.
B) the extent to which the goods are necessities.
C) the strength of the supply curve.
D) the relative scarcity of the goods.

Question

Quizplus · Accepted Answer

Prices in a market economy reflect the relative scarcity of goods. This means that goods that are more scarce will have higher prices and goods that are more abundant will have lower prices. This rationing function helps to allocate resources efficiently by allocating them to the uses that are most highly valued by consumers.

Prices in a Market Economy Perform a Rationing Function Because