In the market-oriented system, for the allocation of resources which one of the following is the most appropriate conveyor of information ?
Market Price
In a market-oriented system nobody issues instructions about what should be produced and for whom; the coordination happens through signals that emerge from voluntary exchange.
The most appropriate conveyor of that information is the market price. A price summarises, in a single number, the relative scarcity of a good and the strength of demand for it. When a good becomes scarce or more wanted its price rises, which simultaneously tells producers that more of it is worth making and tells consumers to economise on it. Resources therefore flow towards their most highly valued uses without any central authority having to collect or process the underlying information.
The Finance Ministry allocates public expenditure and sets fiscal policy, which is a governmental rather than a market mechanism. The Central Bank influences money supply and interest rates, affecting the economy in aggregate but not conveying the detailed relative scarcities of individual goods. Advertisement expenditure conveys promotional messages about particular products and is not a general signalling device for allocating resources across the economy.
Hence in a market-oriented system the most appropriate conveyor of information is the market price.
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