Question

Are markets a good mechanism for society to use to allocate oil use over time?

Answer 1

A Market Economy is a mechanism where buyers and sellers communicate without government legislation needing to interfere. The principle inherent in this method is that sellers want to gain full price for the provided goods, services and resources and buyers want to obtain value for the lowest price. The balance of this relation eventually leads to the price of the market equilibrium. However, it is important to remember in this framework that all factors related to the "Market" have no impact on this relationship which is legislation or policies of the government.Therefore, resources are strictly allocated to the manufacture of those products which give the sellers maximum return and thus give consumers the maximum satisfaction of their wishes at a market price.

Markets use rates as cues for allocating capital to their most valued uses. Consumers are likely to pay higher rates for those goods and services that they trust more. Producers must devote more money to generating higher priced products and services, all things being equal. And other things being equivalent, employees can have more work hours for jobs paying higher wages

This theory of allocation refers to the commodity markets for items such as vehicles, houses and haircuts, as well as the resource markets for items such as labor, land and equipment. In an economy, households play two major roles they demand goods and services, and supply energy. Companies also have dual roles — they deliver goods and services, and seek money. In product and resource markets, the interaction of demand and supply generates prices which serve to assign products to their highest valued alternatives. Factors that interfere with the functioning of a competitive market result in inefficient resource distribution, leading to a decrease in the overall welfare of society