1.2.7 Price mechanism Flashcards
1
Q
The rationing function:
A
when price increases, some people will no longer be able to afford to buy the product and so the limited resources can be rationed and allocated to the people who are able to afford them and those who value them most highly.
2
Q
The signalling function:
A
The change in price indicates to suppliers and consumers that market conditions have changed so they should change the quantity bought and sold
3
Q
The incentive function:
A
It acts as an incentive for people to work hard.
