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Q: What is the role of markets in allocating societal resources?
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What is the role of prices in allocating resources?

Price plays a key role in efficient allocation of resources. It plays a key role in persuading both the suppliers and the consumers, looking in to the market demand with the price factor creating the incentive for the buyers to buy, suppliers feel confident in a better tradeoff between the possible production combinations which is actually a rational policy to be followed both for the efficient distribution and profit maximization. It avoids from economic shrinking as suppliers would look for optimal production possibility and would produce and allocate as much demanded in the market.


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