How The Ration Comes In The Prices?

Let us take stock of what the market mechanism accomplishes. By determining the equilibrium prices and quantities of all inputs and outputs, the market allocates or rations out the scares goods of the society among the possible uses. Who does the rationing? A planning board? Congress or the President? No. The market place, through the interaction of supply and demand, does the rationing. This is rationing by the purse.
What goods are produced? This is answered by the signals of the market prices. High oil prices stimulate oil production, whereas low food prices drive resources out of agriculture. Those who have the most dollar votes have the greatest influence on what goods are produced.
For whom are goods produced? The power of the purse dictates the distribution of income and consumption. Those with higher incomes end up with larger houses, more clothing, and longer vacations. When backed up by cash, the most urgently felt needs get fulfilled through the demand curve.        
Even the how question is decided by supplies and demand. When corn prices are low, it is not profitable for farmers to use expensive tractors and irrigation systems, and only the best land is cultivated. When oil prices are high, oil companies drill in deep offshore and employ novel seismic techniques to find oil.