1.2.7 Flashcards
1
Q
Adam Smith’s invisible hand of the market
A
When the price mechanism determines the market price
2
Q
How are resources alllocated
A
Resources are allocated through the price mechanism in a free market
The price moves resources to where they are demanded or where there is a shortage, remove resources where there are a surplus
3
Q
Price mechanisms three main functions to allocate resources
A
-rationing
- incentive
- signalling
