Final answer:
The price system may not perfectly coordinate economic affairs due to insufficient prices, lack of adequate information within prices, and price stickiness. Government interventions, like price controls, can further impair the efficiency of the price system. Additionally, high inflation can make price-based adjustments more erratic and slower. a. may be too few prices (that is, more markets than prices),
Step-by-step explanation:
The coordination of economic affairs through the price system may not work perfectly for several reasons. One reason is the possibility that there are too few prices, meaning that there are more markets than there are prices to accurately reflect all conditions. Additionally, prices may not contain sufficient information to reflect true supply and demand due to lack of transparency or asymmetric information. Another significant issue is that prices can be 'sticky,' which means they do not adjust quickly to changes in supply and demand, resulting in surpluses and shortages.
Government interventions such as price controls can exacerbate these inefficiencies by preventing prices from adjusting to their equilibrium levels. This is similar to the proverb 'Don’t kill the messenger,' as price controls can hinder the natural flow of market information, causing maladjustments in the economy. Furthermore, high and variable inflation can weaken the incentives for markets to adjust, leading to more prolonged and erratic economic imbalances.