Free price system

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A free price system or free price mechanism (informally called the price system or the price mechanism) is a mechanism of resource allocation that relies upon prices set by the interchange of supply and demand. The resulting price signals communicated between producers and consumers determine the production and distribution of resources. Therefore the free price system rations supplies, distributes income, and allocates resources.

A free price system contrasts with an administered price system, where prices are administered by government in a controlled market. The price system, whether free or controlled, contrasts with physical and non-monetary economic planning.