Signals that guide economic decisions
In market economies, what are the signals which guide economic decisions?
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In market economies, prices are the signals which guide economic decisions and thus allocate scarce resources. For each and every good in the economy, the price makes sure that supply and demand are in balance. The equilibrium price then finds out how much of the good buyers chooses to buy and how much sellers select to produce.
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Quantity of a good: The quantity of a good which buyers demand is found out by the price of the good, income, the prices of associated goods, expectations, tastes, and the number of buyers.
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