How do prices act as signals to allocated goods, services, and productive resources in a market economy?

1 answer:

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In a market economy, the interaction of supply and demand determines the quantity and equilibrium price of the goods and services traded. Likewise, the market is responsible for the distribution of income through the possession of productive factors (capital, labor, etc.). In a market economy, the key signals are prices, which indicate the relative scarcity of resources.

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