Explain how and why a system of freely fluctuating prices works to coordinate economic activity among millions of people through the allocation of "scarce resources that have alternative uses"

Scarce resource refers to a product within the market whose demand is more than the supply within the market. Resource allocation refers to the process of distributing resources within an economy in the most efficient way. Price fluctuation helps allocate scarce resources with alternative uses by increasing the price when the demand increases. This makes consumers use the resource in the most efficient way to avoid incurring losses due to the resource's inefficient use. The price of a commodity can be used in efficient allocation because when the demand is high, the price has to increase to discourage buyers. Thus, buyers who do not have alternatives are the ones who purchase the product.