Free price system

The resulting price signals communicated between producers and consumers determine the production and distribution of resources.

Therefore the free price system rations supplies, distributes income, and allocates resources.

The price system, whether free or controlled, contrasts with physical and non-monetary economic planning.

This information on relative values is communicated, through price signals, to producers whose resources are also limited.

If prices remain high because increases in supply cannot keep pace with demand, then this also signals other business to provide substitute goods in order to take advantage of profit opportunities.