2 How do markets provide for an efficient allocation of scar

2. How do markets provide for an efficient allocation of scarce resources? I

Solution

Markets help an economy to meet an equilibrium when prices meant to play an important role of market clearing

Market encourage consumers to try to satiate their needs with less scarce good and incentivise producers to produce scarce goods

As scarce goods have higher relative prices than other less scarce alternantves and producers produce more scarce goods as they have incentive to earn higher profits