Question

) Why is the price system a more efficient system for allocating scarce resources than by authoritarian means, such as in command economies?

Answer 1

Prices and the ability to make a profit will increase the supply of the scarce resources, thereby lowering prices and increasing demand.

Answer 2

Explanation:

Lets look at each of the options one by one:

Price System: In this system markets allocate resources through the price mechanism. An increase in demand raises price and encourages businesses to use more resources into the production of that good or service. In this system the government limits itself to protecting property rights of people and businesses using the legal system and protecting the value of money or the value of a currency.

Authoritarian System: In this system it is associated with a communist system. The scarce resources are owned by the government. The state allocates resources, and sets production targets and growth rates according to its own view of people's wants. They have their own idea of demand.

By comparing two systems it can be seen that Price System automatically moves resources to where they are most needed. So, price system is more efficient than authoritarian means.