Which of the four main advantages of price in a free market economy would best represent the statement, “prices can be easily increased to solve a problem of excess demand”? price as an incentive price system is “free” prices as signals flexibility

The correct answer here is D: Flexibility

Explanation:

The free-market economy is a system which allows for several advantages, unlike other systems. One of them is the availability of products on the market for consumers to acquire. Also, it allows for people to innovate and create products that respond to the needs of consumers and at the same time to make a profit for their creations, without having anyone control what you produce, and how much you make from it. It all depends on the demand from consumers. The pricing system is a medium through which products acquire their value depending on the supply and demand available and also the existence of competition. As a product is brought out initially, its price will be high as it has no further competition and it may be unique. However, as more products become available, and competition rises, prices will start changing, and the ones who offer good quality at better prices will flourish while the others may fail. This shows the capacity for flexibility given by the pricing system.

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