The signals in markets are determined
A) by supply and demand.
B) for all goods by the government through the use of price controls.
C) in an unfair manner that ends up hurting the poor.
D) by nonprice rationing devices.

Question

Quizplus · Accepted Answer

The signals in markets, such as the price of a good, are determined by the interaction of supply and demand. As demand for a good increases, the price of the good typically increases as well, signaling to suppliers that there is a greater need for the good. As supply increases, the price of the good generally decreases, signaling to consumers that the good is more plentiful. This system of supply and demand is a key driver of market efficiency and helps to allocate resources in an efficient manner.

The Signals in Markets Are Determined