Question

Free operation of price mechanism leads to inequalities in the distribution of income and wealth.

• A. True
• B. False

Answer 1

The correct option is A True

Producers produce goods and service for them who have large money power. Thus, the price mechanism cannot ensure social justice rather it widens inequality in the distribution of income and wealth the rich get richer and the poor poorer.

Price solves the problem of what to produce and in what quantities. There are unlimited wants but there is a scarcity of productive resources. If the price is high the producers will be willing to supply more but the consumers will be buying less and vice versa.

The correct answer is A.