This is referred to as the rationing function of

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Unformatted text preview: ice in the market. Chapter 2 The market system is at work in the bigger picture here, too. Price in the market rations goods and services to those who can afford them. 26 Learning Objective 2-3 Slide 27 How will the system accommodate change? The market system (and prices) automatically address this question in that our production and consumption trends will change as prices in the marketplace send signals that change is essential. For example, when certain goods become too expensive we seek out substitutes for these goods and indirectly force producers to alter their production choices. Chapter 2 Learning Objective 2-4 27 How will the system accommodate change? The market system and reactions to prices therein, will automatically address this question as well. When prices for certain goods become comparatively too expensive, consumers will choose alternatives (substitutes). These choices send signals back to producers that change is needed. It is important to keep in mind that some of this change can...
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