In a market system, which component conveys information about what is relatively scarce and what is relatively abundant?
A) The number of producers
B) The number of consumers
C) Prices
D) The amount of government regulation

Question

Quizplus · Accepted Answer

Prices convey information about what is relatively scarce and abundant in a market system. When a product or service is scarce, the price tends to increase, signaling to producers that they should increase production in order to meet the demand. On the other hand, when a product or service is abundant, the price tends to decrease, signaling to producers that they should decrease production or shift their resources to other areas. This feedback mechanism helps to allocate resources more efficiently in the market.

In a Market System, Which Component Conveys Information About What