One of the functions of the price system is that it?

A. encourages high volume of production
B. dictates what the citizens will consume
C. discourages the consumption of harmful goods
D. regulates production and consumption

Correct Answer:

Option D – regulates production and consumption

Explanation

The price system function in such a manner that the adjustments in the System take place almost automatically without and direction or dictation from a central authority, Price is the coordinator both of production and Consumption. The consumers are able to convey their preferences through the prices they are willing to offer. Similarly, the producers are able to indicate the accuracy or abundance of a commodity by mean of the price they are willing to accept, If the price rises it changes demand and stimulates supply and vice versa. If there is a greater demand for a commodity than the supply thereof, then the adjustment between the two will be brought about. Conversely, if the supply is greater than the demand, the price will fall and bring about an equilibrium between the two