CASE STUDY 2.2 ; PRICE MECHANISM AND FREE MARKETSCase question; 1. Marets o!erate in t"e #est so$ia% interest; &e'an& an& su!!%( a%%o$ate resour$es )"eret"e( are 'ost nee&e&.* Co''ent on t"is state'ent. T"e re%ations"i! #et)een &e'an& an& su!!%( un&er%ie t"e +or$es #e"in& t"e a%%o$ation o+resour$es. In 'aret e$ono'( t"eories, &e'an& an& su!!%( t"eor( )i%% a%%o$ate resour$es in t"e 'ost e++i$ient )a( !ossi#%e. T"is "as #een !ro-e& #( t"e %a) o+ &e'an&an&t"e %a) o+ su!!%(.T"e %a) o+ &e'an& states t"at, i+ a%% ot"er +a$tors re'ain equa%, t"e "i."er t"e !ri$e o+ .oo&, t"e %ess !eo!%e )i%% &e'an& t"at .oo&. T"e a'ount o+ a .oo& t"at #u(ers !ur$"ase at a "i."er !ri$e is %ess #e$ause as t"e !ri$e o+ a .oo& .oes u!, so &oes t"e o!!ortunit( $ost o+ #u(in. t"at .oo&. In t"e ot"er "an&, %ie t"e %a) o+ &e'an&, t"e %a) o+ su!!%( &e'onstrates t"e quantities t"at )i%% #e so%& at a $ertain !ri$e. T"e "i."er t"e !ri$e, t"e "i."er t"e quantit( su!!%ie& #e$ause se%%in. a "i."er quantit( at a "i."er !ri$e in$reases re-enue.2. Marets &o not a%%o$ate resour$es a$$or&in. to t"e so$ieta% !re+eren$es/ &e'an& is &eter'ine& #( t"e !urse, not #( t"e nee&s o+ t"e !eo!%e. 0"en in$o'e is une-en%( &istri#ute& in so$iet(, 'arets $annot ensure t"e 'a1i'i2ation o+ so$ia% .oo&. Do (ou a.ree3 E%a#orate t"e reasons +or (our ans)er, es!e$ia%%( +ro' an Is%a'i$ !ers!e$ti-e.Yes, I a' a.ree. In Is%a'i$ i&eo%o.(, !eo!%e "a-in. !"(si$a% or 'enta% &isa#i%it( "a-e an equa% s"are an& ri."t, as t"e a#%e ones, in t"e 4o&5 .i-en resour$es. T"eir ri."t is !ri&e+u% %i+e a%on. )it" se%+5estee' an& is t"e senseo+ !ea$e. In e-er( !erio&, t"e stan&ar& %e-e% o+ %i-in. is &eter'ine& )it" t"e su!!%( o+ +oo& , $%ot"in., "ousin., e&u$ation, entertain'ent et$. "is %e-e% is &eter'ine& !ro!ortiona% to t"e )e%+are %e-e% o+ t"e so$iet( at a%% an& )it" t"e i'!ro-e'ent o+ t"e 'ateria% $on&ition o+ so$iet( t"e %i-in. stan&ar& a%so in$reases.T"e ri$" 'ust .i-e t"e s"are o+ t"e nee&( +ro' t"eir )ea%t" so t"at t"e( are a%so a#%e to %i-e in a +easi#%e en-iron'ent. I+ t"e( &on*t !er+or' t"eir &ut( t"e( are sinners. I+ t"e ri$" &on*t !a( t"e s"are o+ nee&( -o%untari%(, t"e ru%er an& t"e Is%a'i$ .o-ern'ent s"ou%& tae t"e s"are o+ t"e nee&( +ro' t"e ri$" an& .i-e it to t"e'. I+ +ro' t"is )a( t"e nee& o+ t"e !oor &oes not ri$" a&equa$( t"en it s"ou& #e +u%+i%%e& t"rou." t"e ot"er resour$es un&er t"e $ontro% o+ Is%a'i$ .o-ern'ent.