Price Allocate Resources Flashcards
1
Q
Definition of signalling function
A
Price provide information to buyers and sellers
2
Q
Definition of rationing function
A
Rising prices ration demand for goods/services
3
Q
Definition of allocative function
A
Changing prices allocate scarce resources away from market with excess supply into market with excess demand
4
Q
Definition of incentive function
A
Prices create incentives for people to alter their economic behaviour
