Prices in a Market Economy Perform a Rationing Function Because

question 137

Multiple Choice

Prices in a market economy perform a rationing function because they reflect

• A) the demand of all buyers in the market.
• B) the extent to which the goods are necessities.
• C) the strength of the supply curve.
• D) the relative scarcity of the goods.

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Definitions:

Producer Surplus

The difference between the amount a producer is paid for a good compared to the minimum amount they would be willing to accept for it, a measure of producer welfare.

Price

The sum of money needed to buy a product, service, or commodity.

Quantity

The amount or number of a material or immaterial good considered as a unit or in discrete amounts.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive in the market.