Question

How does price serve as an incentive in a market economy?

Answer 1

Answer:

Price serves as an incentive in a market economy because it provides competition for the producers to have the highest profit

Explanation:

Talking about the market economy and the correlation of price, product, and demands, we have a connected cause and effect not only in the increment or decrease of prices and existence of the product or service but also in the rivalry between similar companies or product to be the one with the control of the biggest part of the market.

Answer 2

How prices serve as an incentive in a market economy is whenever there is a decline in the supply of a particular commodity, what the suppliers do is increase the prices, and in contrast, when there is enough supply, they decrease the prices as well. Hope this answers your question.