The rationing function of prices refers to the fact that government must distribute any surplus goods that may be left in a competitive market.

Rationing Function

The ability of market prices to allocate scarce goods and services to those who are willing and able to pay for them.

Surplus Goods

Items for which the quantity supplied exceeds the quantity demanded, often leading to price reductions to clear excess inventory.

Competitive Market

A market where numerous sellers compete to sell their goods or services to a large number of buyers, promoting efficiency and innovation.