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Why is it essential that prices are flexible within our economy? Do they successfully reflect the...

Why is it essential that prices are flexible within our economy? Do they successfully reflect the absolute price of what buyers and sellers are asking in the market?

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Without flexible prices markets will not clear. There will be either shortage when price is low or excess when price is high. It is the change in prices that equilbrate supply and demand. E. G in case of high demand price will tend to rise. As a result supply will increase and demand will fall until both become equal

Yes flexible prices reflect absolute prices successively. E. G higher demand means higher absolute prices. This can happen only if prices are flexible

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