In a free market economy. the rationing of scarce goods is done principally by_______
Consumers
The government
The price mechanism
All of the above
Explanation
No explanation available
Video Explanation
No video available
Post your Contribution
Discussions (2)
Not A, the right answer is C.
Rationing is a function of price mechanism.
Rationing has to do with cutting down demand in when there is scarcity, most especially to pull down prices which should have been high already.
Whenever resources are particularly scarce, demand exceeds supply and prices are driven up. The effect of such a price rise is to discourage demand, conserve resources, and spread out their use over time. The greater the scarcity, the higher the price and the more the resource is rationed. This can be seen in the market for oil. As oil slowly runs out, its price will rise, and this discourages demand and leads to more oil being conserved than at lower prices.
Price mechanism has to do with interaction of forces of damand and supply. And in a free market or perfect competition, it is price mechanism that works on the chain of price-demand-and supply of goods and services.
