Free markets ration goods with prices.

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Senior Member
Ukrainian & Russian
When the government imposes a binding price ceiling on a competitive market, a shortage of the good arises, and sellers must ration the scarce goods among the large number of potential buyers. [...] The rationing mechanisms that develop under price ceilings are rarely desirable. [Long lines, discrimanation according to seller bias, etc.] By contrast, the rationing mechanism in a free, competitive market is both efficient and impersonal. [...] Free markets ration goods with prices.
(Principles of Economics; N. Mankiw)

Would you be so kind as to tell me whether it should be read as follows: 'Free markets use prices to restrict the distribution or consumption of goods'?

  • PaulQ

    English - England
    Yes, that's what it means. However, this is a question of cause and effect: "Prices ration goods in a free market and "Goods are rationed by price in a free market." are also good.
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