Define and develop examples of market clearing price. Clearly defined property rights and prices that move freely in response to changing conditions of demand and supply encourage exchange and the creation of wealth. Markets and prices encourage specialization and interdependence. In a society characterized by extensive specialization, people obtain most of what they want by supplying things that satisfy the wants of other people. Markets are the result of interaction between supply and demand.
Monetary prices are incentives for buyers and sellers to act cooperatively.
This cooperation is impersonal and is based on people making choices that reflect their perceptions of opportunity costs. This cooperation results in clearing markets of both supply and demand. War has broken out in the Middle East, sharply reducing the supply of oil to the United States. Average annual U.S. consumption of gasoline for motor vehicles before the outbreak of war was 120 billion gallons. It must now be reduced to 96 billion gallons.