The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the:
A) Guiding function of prices
B) Monetary function of prices
C) Circular flow of income
D) Market determination of prices

Question

Quizplus · Accepted Answer

The guiding function of prices refers to how prices act as signals to businesses and resource suppliers to adjust their production and resource allocation decisions in response to changing market conditions. This is a fundamental aspect of the market system and allows for efficient allocation of resources according to consumer demand.

The Market System Communicates Changes in Market Conditions and Elicits