Price rationing The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market. Velg ett alternativ:
False
True
The correct answer and explanation is :
Correct answer: False
Explanation (Approx. 300 words):
The statement is false because it misrepresents the concept of price rationing in a competitive market.
Price rationing refers to the natural function of market prices in allocating scarce resources among competing uses. It is a core principle of a market economy, not a government-controlled distribution mechanism. When goods are scarce, prices rise, which reduces the quantity demanded and/or increases the quantity supplied, bringing the market back into equilibrium. In this way, prices “ration” the goods to those who value them most and are willing to pay more.
In contrast, government rationing involves direct control over the distribution of goods—such as during wartime or in centrally planned economies—where the state determines who gets what and how much. This is different from price rationing, which is decentralized and driven by the voluntary interactions of buyers and sellers.
The statement incorrectly implies that the government must distribute surplus goods in a competitive market. In reality, in a competitive market, if there is a surplus (more supply than demand), the price will fall. This lower price increases demand and discourages excess production, gradually eliminating the surplus. There’s no need for the government to intervene unless there are price controls, market failures, or special policy reasons (e.g., public goods, externalities, or inequality).
To summarize:
- Price rationing is a market mechanism, not a government function.
- In a competitive market, prices adjust to allocate resources and eliminate surpluses or shortages.
- The government only intervenes under special circumstances, not as a default process in competitive markets.
Therefore, the idea that the government must distribute surplus goods in a competitive market is inaccurate, and the correct answer is False.