In a free market economy, the price system allocates resources?
Answer Details
In a free market economy, the price system allocates resources to their best alternatives. This means that the forces of supply and demand determine the prices of goods and services, which in turn guide the allocation of resources in the economy. Producers will produce goods and services that are in demand at profitable prices, while consumers will buy goods and services they need or want at prices they are willing to pay. This way, the resources are allocated efficiently to the best use, resulting in the maximum benefit to society. The government's role is usually limited to enforcing property rights and regulating markets to ensure fair competition, but it does not dictate the allocation of resources.