MICRO 10 Flashcards
1
Q
The price mechanism
A
The interaction between consumers and businesses that determines the allocation of resources
2
Q
Allocation
A
allocating scarce resources to where they are most needed
3
Q
Rationing
A
Prices serve to ration scarce resources when market demand outweighs the level of supply
4
Q
Signalling
A
Market prices adjust to show where resources are required, and where they are not
5
Q
Incentives
A
When the price of a product rises, quantity supplied increases as businesses respond
6
Q
Market Failure
A
Where the Free fails to allocate resources efficiently, leading to a net welfare loss for society.
