Price Mechanisms

Question 1

What is a free market

Answer 1

Any place where buyers meet suppliers to exchange goods or services free from gov intervention

Question 2

What are the functions of price

Answer 2

Allocate - scarce recourse’s efficiently
Ration- scarce recourses
Signal - excess demand/ supply
Incentivise- producers to increase or decrease output

Question 3

Whats a shortage

Answer 3

When excess demand creates price rise

Question 4

What is surplus

Answer 4

When excess supply means prices fall