Price Mechanism

Question 1

what does price mechanism determine

Answer 1

the market price

Question 2

what do higher prices signal

Answer 2

Higher prices signal to producers that consumers want more goods

Question 3

what do lower prices signal

Answer 3

Lower prices signal to producers that consumers want fewer goods

Question 4

What is price mechanism

Answer 4

The interaction of supply and demand to determine the price in a market.

Question 5

Signalling (uplearn)

Answer 5

higher prices signal to producers that consumers want more of their goods, so producers supply more of them.

Lower prices signal to producers that consumers want fewer of their goods, so producers supply fewer of them.

Question 6

Incentivising (uplearn)

Answer 6

Incentivising: higher prices increase the incentive to supply, because producers can make more profit.

Lower prices decrease the incentive to supply, because producers make less profit.

Question 7

Rationing (uplearn)

Answer 7

higher prices ration (or limit) goods to the consumers who will pay the most.