Price Mechanism (CH11)

Question 1

Signalling (1)

Answer 1

Price signal to consumers and producers that they should change their consumption/ production levels

Question 2

Incentives (2)

Answer 2

Price encourages consumer and producers to change their behaviour

Question 3

Rationing (3)

Answer 3

When resources are scarce, price increases which discourage demand and rations resources. Only those that can afford will pay

Question 4

Allocate (4)

Answer 4

Prices allocate resources to where they are needed and wanted