Price mechanism Flashcards
1
Q
What are the key functions of price mechanism?
A
Rationing device: the market forces will ensure that the amount demanded is equal to the amount supplied
Incentive: the idea of making profit acts as an incentive to firms to produce goods and services
Signalling device: to producers to increase or descrease the amount supplied
To determine changes in wants: a change in demand will be reflected in a change in price
2
Q
What different types of markets are there where the price mechanism is present?
A
Local market
National market
International market
