Micro: Market Failure

Question 1

What does the price mechanism involve

Answer 1

The price mechanism involves using the invisible hand to achieve an efficient allocation of resources

Question 2

What does the price mechanism show

Answer 2

The price mechanism shows how demand and supply interact

Question 3

What will a change in the price of a good do to the demand

Answer 3

A change in the price of a good will change the quantity demanded

Question 4

Draw a price mechanism graph

Answer 4

https://app.senecalearning.com/classroom/course/cc1e08b0-784f-11e8-954a-7d41900c3850/section/c15bfd45-759f-45be-90e4-e7de0a4cde8b/session

Question 5

Why is the price mechanism free from bias

Answer 5

The price mechanism is free from bias because it is not governed by one human, but lots of different agents interacting

Question 6

What are the different functions of the price mechanicanism

Answer 6

Incentive function
Signalling function
Rationing function