Y1 7

Question 1

ARSI of free market prices acronym meaning

Answer 1

Allocate resources effectively
Ration resources
Signal excess demand/ supply
Incentivises production at optimal point

Question 2

ARSI chain of reasoning

Answer 2

Prices rise due to excess demand, signals for more resources, incentivises firms to increase output to increase profit, resource rationing as consumption falls, allocative efficiency at equilibrium