One of the most important functions of the markets is to provide a tool for rationing goods and services

Rationing is defined as the process of controlling the distribution of goods and services in the market. It is indeed true that one of the most important functions of the market is to provide a tool for rationing goods and services. The market forces of demand and supply play an important role in this process. When demand rises in the economy, the price of goods and services also rises, resulting in a fall in demand for goods and services. However, the increase in prices will encourage new firms to enter the market, resulting again in an increase in supply. Thus, the distribution of goods and services are controlled by market forces.

The need for other rationing tools arises when market forces fail to operate in some uncertain conditions. Two rationing tools other than market forces are:

1. Limiting the quantities of goods and services that could be purchased is one of the tools of rationing goods and services.

2. Price floor can be imposed to regulate the distribution of goods and services in the market.