Non-price rationing is used to allocate scarce goods when

• A. Prices clear the market efficiently
• B. There is no shortage
• C. There is perfect information
• D. Prices fail to clear the market

Answer: (D)

Non-price rationing comes into play when the market price isn’t doing the job of allocating scarce goods. If prices are unable to rise to balance supply and demand—often because governments cap prices or because a shortage exists—there isn’t enough supply at any given price to meet everyone’s wants. In that situation, resources are divided by non-price methods like queues, coupons, or priority access rather than by how much people are willing or able to pay. So the reason this is the right choice is that it describes the scenario where the price mechanism fails to clear the market, forcing allocation to be decided by non-price criteria. If prices could clear the market, there would be no need for such non-price methods; if there’s no shortage, or if information is perfect, the price system can still allocate resources efficiently, so non-price rationing isn’t required.