The reason for making a payment for the goods that consumers consume.
Explanation of Solution
In an economy, most goods have limited supply whereas their wants are unlimited. That means the inputs that are used to produce most goods and services (for example, capital and labor), are more scarce than the quantity that consumers desire to consume.
Here in this case, the price acts as a rationing mechanism to prevent the over-usage of a particular scarce resource by making that resource available at the quantity where demand for that resource equals its supply. However, in the case where the price is zero for a particular scarce resource, it will be over-used as its demand will be higher than its supply.
Want to see more full solutions like this?
Chapter 1 Solutions
Microeconomics Plus Mylab Economics With Pearson Etext -- Access Card Package (2nd Edition) (the Pearson Series In Finance)
- Do consumers always make rational consumer decisions when buying economic goods?arrow_forwardHow a change in the market (including information, preferences, technology, price of alternative goods, regulations, taxes, etc.) has shifted either the supply or demand of a good. How did this change affect the market equilibrium for that good or service?arrow_forwardWhat other steps could be taken to make people more knowledgeable about the journey that food takes from farm to table?arrow_forward
- Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub CoMacroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
- Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning