Free price system

A free price system or free price mechanism (informally called the price system or the price mechanism) is a mechanism of resource allocation that relies upon monetary prices set by the interchange of supply and demand. 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.

A free price system contrasts with a fixed price system where prices are administered by government in a controlled market. The price system, whether free or controlled, contrasts with physical and non-monetary economic planning.


Share this article:

This article uses material from the Wikipedia article Free price system, and is written by contributors. Text is available under a CC BY-SA 4.0 International License; additional terms may apply. Images, videos and audio are available under their respective licenses.