Three reasons why a price based system works more efficiently than central planning are:
Price based systems allow for flexibility in the marketplace between consumers and suppliers
Price based systems allow for a larger selection of goods and services
Command economies are very inefficient at delivering consumer goods to the marketplace despite their lower prices
The price system is a system of economic organization in which each individual in his capacity as a consumer, producer and resource owner is engaged in economic activity with a large measure of freedom.
In every society there are legal and social institutions. Individual economic actions must conform to them. In a free enterprise economy to which the price system primarily relates, the factors of production are privately owned.
Every price system (or economy) seeks to attain efficiency with the limited resources at its disposal. In general, efficiency means the ability to make the best use of an economy’s available resources. Efficiency is of two types: technical and economic.
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