If markets throughout the global economy all have flexible and continually adjusting prices, then:

• A. prices will remain constant regardless of shifts in market conditions
• B. elasticity will have no impact on consumer or producer behavior
• C. market shortages and surpluses will become more frequent
• D. resources will be allocated efficiently in response to changes in supply and demand

Answer: (D)

Verified step by step guidance

1. Understand the concept of flexible prices: Flexible prices are prices that can adjust quickly and continuously in response to changes in market conditions such as supply and demand shifts.
2. Recall the role of prices in resource allocation: Prices act as signals to both consumers and producers, guiding decisions about how much to buy or sell, which in turn affects how resources are distributed in the economy.
3. Analyze what happens when prices are flexible: If prices adjust freely, any excess supply (surplus) or excess demand (shortage) will be corrected by price changes, moving the market back toward equilibrium.
4. Consider the impact on efficiency: Because prices reflect scarcity and preferences, flexible prices help ensure that resources flow to their most valued uses, leading to an efficient allocation of resources.
5. Conclude that with flexible and continually adjusting prices, the market efficiently responds to changes in supply and demand, preventing persistent shortages or surpluses and promoting optimal resource allocation.