What is a primary function of prices in a market economy?
A) to provide participants with economic information
B) to provide participants with spending limits
C) to provide participants with accounting capabilities
D) to provide participants with an equitable distribution of goods

Question

Quizplus · Accepted Answer

Prices play a critical role in a market economy by providing important economic information to all participants in the market. Prices convey information about the availability of goods and services, the level of demand for those goods and services, and the relative scarcity of resources. This information helps individuals and businesses make rational economic decisions about what to produce, how much to produce and at what price to offer goods and services for sale. In this way, prices serve as a crucial mechanism for coordinating economic activity and ensuring that resources are allocated efficiently in a market economy.

What Is a Primary Function of Prices in a Market