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ECONOMICS - THEME 1 > PRICE MECHANISMS > Flashcards

PRICE MECHANISMS Flashcards

1
Q

THE THREE FUNCTIONS OF PRICE MECHANISMS

A

➢RATIONING
➢SIGNALLING
➢INCENTIVE

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2
Q

INCENTIVE

A

Higher prices allow firms to produce more goods/services and encourage increased production and sales by providing higher profits

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3
Q

SIGNALLING

A

Changes in price show changes in supply/or demand and acts as a signal to producers and consumers

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4
Q

RATIONING

A

If there is a high demand for a good/service and its supply is limited, then the price will be high

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ECONOMICS - THEME 1 (5 decks)

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