2.4 Price

Question 1

Price

Answer 1

The sum of money you have to pay for a good or service- determined by the interaction of supply and demand

Question 2

Does price = worth

Answer 2

No, price does not equal worth because people value goods and services differently

Question 3

What is the difference between price and cost

Answer 3

Price is the value of money a consumer pays for a good or service.
Cost is how much money it takes for a supplier to supply the good or service

Question 4

Efficiency

Answer 4

The optimal production and distribution of scarce resources

Question 5

What are the characteristics of the best production level
Regarding production cost and profit margin

Answer 5

Production costs are lowest and profit margin is highest

Question 6

What is prices role in determining efficient distribution of resources

Answer 6

Signalling, Transmission or preferences, Rationing.

Question 7

What is signalling

Answer 7

When prices change to signal where resources are needed.
If prices rise, it shows more resources are needed, but is they fall, it signals less resources are needed

Question 8

Transmission of preferences

Answer 8

Producers can send information to suppliers about their changing needs
If there is higher prices, owners of resources will be incentivised to supply more.
If the economy is not doing so well, some suppliers may withdraw from the market

Question 9

Rationing

Answer 9

Price helps to ration scarce resources
If resources are scarce, price rises so that only those who are most willing and able to pay the price are allocated the resources.

Many stadiums are too small to accomodate the demand, so teams raise the price

Question 10

Equilibrium price and quantity

Answer 10

Where the quantity supplied exactly matches the quantity demanded

Question 11

Allocation of resources

Answer 11

How scarce resources are distibuted among producers and how scarce goods and services are distributed among consumers

Question 12

Determination of price

Answer 12

The interaction of the free market forces of supply and demand to establish the general price level for a good or service

Question 13

If there is excess supply, what will the suplpier have to do

Answer 13

Lower the price, and move resources away from producing that good or service

Question 14

Market forces

Answer 14

Factors that determine price levels and the availibilty of goods and services in an economy without government intervention

Question 15

What role do markets play in the determination of price

Answer 15

A market is a place where buyers and sellers come together. If not enough consumers purchase a good at a given price point, there is excess supply and the price will have to be lowered

Question 16

What role do markets play in the allocation of resources

Answer 16

If there is not enough demand from consumers, then producers will concentrate on using resources to produce other goods and services.

Consumer spending signals to the producers what goods to priduce/ not produce.