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Strengths of a Market System- One of the strengths of a market system is that relative...

Strengths of a Market System- One of the strengths of a market system is that relative prices reflect relative costs. Explain this concept in the context of efficient allocation of scarce resources.
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The interaction of firms & consumers in a free market economy allows commodities & inputs to be allocated prices. The relative prices & alterations in price mirror the forces of supply & demand & aid resolve the economic issue. Resources move to where they are in less supply, comparative to the demand, & move away from where they are in less demand.

When resources are especially scarce, demand outdoes supply & rates are pushed up. The impact of such a rise in price is to dissuade demand & save up on resources. The more the scarcity, the greater the price & thus greater amount of that resource is rationed. This is observes in the oil sector. As oil gradually depletes, its rates will rise,& this dissuades demand & results in more oil being saved than at lesser prices.

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