Final answer:
The role that prices play in distributing scarce goods to those consumers who value them the most highly is known as the allocative function of price.
Step-by-step explanation:
Prices serve as a powerful mechanism for allocating scarce resources efficiently. In the context of limited supply and high demand, the allocative function of price ensures that goods and services are distributed to those who are willing to pay the most. When prices increase due to high demand, consumers who value the product more are willing to pay the higher price, while those who don't value it as much might opt-out.
This process efficiently allocates resources to those who place the highest importance on obtaining them. Conversely, if demand decreases, prices tend to drop, making the product accessible to a wider range of consumers. The allocative function of price, therefore, ensures that resources are directed to where they're most valued within the market economy.
The correct answer is (B) allocative function of price.