The market mechanism

Question 1

the price/market mechanism

Answer 1

a concept that free markets will determine an equilibrium in the supply and demand for goods

Question 2

what did Adam Smith refer to the market mechanism as

Answer 2

the invisible hand

Question 3

The three functions of the price mechanism in the market

Answer 3

signalling function
incentive function
rationing function

Question 4

signalling function

Answer 4

prices adjust to demonstrate where resources are required, and where they are not. prices rise and fall to reflect scarcities and surpluses.

Question 5

incentive function

Answer 5

something that motivates a producer or consumer to follow a course of action or to change behaviour

Question 6

rationing function

Answer 6

prices serve to ration scarce resources when demand in a market outstrips supply

Question 7

6 stars for a logical chain of reasoning

Answer 7

cause
effect
excess
market mechanism
expansion/contraction
result