Which one of the following scenarios best illustrates the rationing function of the price mechanism?
A sustained rise in the market price of organic vanilla beans increases profit margins, motivating agricultural firms to clear more land and expand their cultivation of vanilla crops.
An increase in the price of cobalt conveys information to battery manufacturers about a tightening of global supply, prompting them to research alternative raw materials.
A sharp rise in the price of aviation fuel during a supply disruption limits consumption to commercial airlines with high willingness to pay, while leisure pilots are priced out of the market.
The government introduces a nationwide subsidy for solar panel installations, lowering the cost to homeowners and accelerating the transition to renewable energy.
16 exam-style questions on Edexcel A A Level Economics 1.2.7 Price mechanism. Each one has a worked solution and a mark scheme showing where the marks go.