In a free market, prices depend on supply and demand, serving as signals that guide economic decisions and ensure resource allocation efficiency.
Prices in a free market depend on supply and demand. Supply represents the quantity of a product offered for sale at various prices by producers, while demand reflects consumers' willingness to purchase at different price levels, creating an equilibrium price.
In a market economy, prices act as signals that convey information about the relationship between supply and demand, guiding producers and consumers in their economic decisions.
This mechanism ensures that resources are allocated efficiently, with prices adjusting based on the interplay between what consumers are willing to buy and what producers are willing to supply.
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