Characteristics:-

In the market sector of the economy the actions of numerous persons,

making their own decisions in the light of information available and
relevant to them, determine what shall be produced, how it will be
produced and who will get the product. The solution is reached through
the operation of prices , not only the prices of consumers' goods and
services, but also the prices of producers' goods of all kinds, the price of
land (which can be regarded as a particular kind of durable good, and the
price of labour. In other words the price system embraces both the
products and the factors of production. Prices serve a number of functions,
all closely interconnected.

Firstly, they act as a rationing mechanism for the scarce products and
recourses available. They ration consumers' goods in such a way that each
household is able to obtain that combination of good and services which,
within its budget limitations (an important qualification about which we
shall have more to say later), enables it to maximise its satisfaction (or ,
more accurately, expected satisfaction). This assertion becomes clearer by
reference to.