T8 - Allocation of resources Flashcards
1
Q
Functions of price
A
To allocate resources
To ration supply
To signal
To incentivise
2
Q
What is the invisible hand of the market
A
Even without any observable intevention, free markets will determien the supply and demand equilirbirum for goods
3
Q
When does teh signalling function occur on a graph
A
When supply shifts either to the left or right
4
Q
How does demand work as an allocationn function
A
When say demand is higher it is a signal to individuals to alloctae resources to making x type of good
