The signals that guide the allocation of resources in a market economy are prices.
An economic system in which two forces known as supply and demand work together and affect the entire market. It is important to mention that the production of services and goods is dependent entirely on supply and demand.
The market price in a market economy steers or guides resource allocation. Consumers pay more prices for the products that the consumer consider valuable to them. This allows the producers to use more resources in the production of such high-priced products. Hence, a demand and supply chain is created through the price.
It can be concluded that the signals that guide the allocation of resources in a market economy are prices.
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