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JAMB Economics 1986 Question 16

Question 16

Price Determination

The main function of price mechanism is to

  1. A.limit consumer demand
  2. B.enable producers make profits
  3. C.allocate scarce resources among competing ends
  4. D.ensure consumer sovereignty.
Show the answer and explanation

Answer: C (allocate scarce resources among competing ends)

Explanation

Through changes in prices, the market decides which uses scarce resources go to; this allocation is the main job of the price mechanism.