Price Mechanism Flashcards
1
Q
Price mechanisims
A
the process of how supply and demand come toegether to form a market with a equilibrium price and quantity. Goods are then rationed based on wether or not individuals can afford the equilibrium price or not.
2
Q
what are the two features
A
signalling and rationing
3
Q
signalling
A
where the supply and demand curve give information to buyers and sellers to aid there decision making e,g supply is upwards sloping because it acts as a signal to producers to increase production at higher prices due to an increased profit incentive
4
Q
Rationing
A
refers to wether or not individuals can afford the market equilibrium price and therefore goods are rationed based on if people can afford the price or not
