The market mechanism uses price as a rationing device.

Question

Quizplus · Accepted Answer

The market mechanism uses price as a way to allocate goods and services according to the supply and demand. When demand is greater than supply, prices rise and thus allow suppliers to produce more and consumers to purchase less. On the other hand, when supply is greater than demand, prices fall and suppliers produce less while consumers buy more. Therefore, price acts as a rationing device in the market economy.

The Market Mechanism Uses Price as a Rationing Device