Chapter 11- price mechanism

Question 1

price mechanism

Answer 1

is an economic model that helps to explain the allocation of resources between different possible uses. It shows how the invisible hand guides resources towards production of what consumers will buy.

Question 2

price mechanism functions

Answer 2

signalling
rationing
incentives

Question 3

signalling

Answer 3

price gives signals to producers and consumers

Question 4

rationing

Answer 4

only those willing and able to pay the price get the products or resources.

Question 5

incentives

Answer 5

profitability motivates firms; value for money motivates customers

Question 6

allocation of resources

Answer 6

reflects the way in which economic agents take decisions about what to buy, what to produce and how to use the best available land, labour and capital.

Question 7

oligopoly

Answer 7

is a market structure with a few large firms dominating the market. There are often smaller firms competing as well. Present in many mass markets.

Question 8

Niche Market

Answer 8

a small segment of a market with distinctive requirements. May be associated with subcultures - groups of people with common interests.