price mechanism

Question 1

price mechanism meaning

Answer 1

price mechanism allocates goods and services in an impersonal way (known as the invisible hand)

free market allocate resources through the interaction of demand and supply

Question 2

what is price

Answer 2

value of a good or service is exchanged at

Question 3

change in demand and supply of goods and services =?

Answer 3

change in its price and the quantity bought or sold - this is price mechanism

Question 4

e.g. end of 9 markers use …

Answer 4

SIRA
S- signaling change in price act as a signal to producers and consumers. e.g. high prices showcase demand is high - signals to producers to increase production

I- incentives of firms to make profit and increase sales of consumers- to maximize their own economic welfare

R- rationing functional high demand for g/s is limited- the price will remain high. supply of that good would be restricted.

A- all scarce resources are allocated in the market efficiently. RESOURCE ALLOCATION has occurred efficiently.

Question 5

prices will change until…

Answer 5

equilibrium is reached and when demand equals supply

Question 6

HOW DO YOU KNOW IF THERE IS A PRICE MECHSANISM QUESTION

Answer 6

CHANGE IN SUPPLY OR DEMAND AND AFFECTS PRICE IT IS PRICE MECHANISM QUESTION!!!