Rationing function
Definition. The rationing function is one of the roles of the price mechanism, by which rising prices allocate scarce goods to those consumers most willing and able to pay. When a good becomes scarcer, its price rises, discouraging some consumers and ensuring that limited supplies are distributed without the need for queues or central direction.
By rationing scarce resources through price, the mechanism resolves the basic problem of allocating goods among competing wants, deterring marginal buyers when supply falls short of demand.
This term belongs to The Price Mechanism and Its Functions in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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