The allocation of goods and services in a free market economy is performed by

  • A the price system
  • B the banking system
  • C the central planning body
  • D government budgets
waec 2012economics

The correct answer is A. the price system

In a free market economy, the price mechanism regulates production and labor. Companies sell goods and services at the highest price consumers are willing to pay while workers earn the highest wages companies are willing to pay for their services.

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