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) market price
D) the amount of resources used in producing the goods and services

Question

Quizplus · Accepted Answer

Market price conveys information about what is relatively scarce and what is relatively abundant. When a good or service is in high demand and there is a limited supply of it, the market price will increase. This increase in price signals to producers that they should produce more of that good or service in order to meet the demand. On the other hand, if there is an oversupply of a good or service, the market price will decrease, signaling to producers that they should decrease production or focus on something else. Therefore, market price serves as an important signal in the market system.

In a Market System, Which Component Conveys Information About What