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Basically the price mechanism acts as "an invisible hand" or signaling mechanism. They play a key role in allocating resources and the distribution of the national product.
Consumers react to prices with higher or lower demand and producers act accordingly. In other words prices help producers determine the quantity supplied. If consumers demand is high at a certain price, then producers know that they ought to increase supply. If demand is low then they ought to reduce supply. ..that's the basic concept. For more I'd suggest reading some books on micro economics or stuff like Lipsey and Crystal.
1. IT ALLOCATES RESOURCES EFFICIENTLY.( DEMANDERS GET THE MOST FOR THEIR MONEY AND SUPPLIERS GET A GOOD PRICE FOR THEIR PRODUCT)
2.DEMAND AND SUPPLY ARE ABLE TO ACT NATURALLY. ECONOMIC EFFICIENCY.( THE ALTERNATIVE IS A CENTRALIZED SYSTEM WITH THE GOVERNMENT ALLOCATION RESOURCES. THIS RAISES THE QUESTION," DOES THE GOVERNMENT KNOW WHAT IS BEST FOR THE PEOPLE?")
these are quotes from my economics book.
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Describe four advantages of using price as an allocating mechanism?
Advantages of using price as an allocating mechanism are that it's a basic system and is already well-known. Other advantages are that it's easy to understand and the principles are universal in nature.
The negotiation of prices for goods and services depending on supply and demand is referred to as which of these?
Price mechanism (A+)
How a mixed economy uses market mechanism to solve basic economy problem?
A mixed economy can use the price mechanism to solve basic economy problem by eliminating a surplus if there is a surplus of goods causing the problem. This will cause the market price of those goods to drop. The price mechanism can also be used to expand suppliersâ?? production of a certain good when prices are rising because there is a high customer demand for that good.
Advantages and disadvantages of price legislation?
what is the advantages and disadvantages of price legistlation
What is Rationing as a function of price mechanism?
This is when consumers and producers respond to information( signalling) and incentive provided by the prices then scarce resources will be rationed between competing uses
What are the advantages disadvantages of the price mechanism?
price mechanism is hte demand and supply of goods and services
What are four advantages of using price as an allocating mechanism?
The advantages of using price as an allocating mechanism include that it is a simple system and it is already known. Two other advantages are that it is easy to understand and it is universal.
Describe four advantages of using price as an allocating mechanism?
Advantages of using price as an allocating mechanism are that it's a basic system and is already well-known. Other advantages are that it's easy to understand and the principles are universal in nature.
What are the advantages and disadvantages of Quick return mechanism?
advantages of quick return mechanism
Disadvantages of price mechanism?
Price mechanism is the system where supply and demand are what determines prices of products or services. Unemployment, inflation, and uneven distribution of resources are disadvantages of price mechanism.
What mechanism does a De-stoner uses?
let it use any mechanism....:-/
The negotiation of prices for goods and services depending on supply and demand is referred to as which of these?
Price mechanism (A+)
How a mixed economy uses market mechanism to solve basic economy problem?
A mixed economy can use the price mechanism to solve basic economy problem by eliminating a surplus if there is a surplus of goods causing the problem. This will cause the market price of those goods to drop. The price mechanism can also be used to expand suppliersâ?? production of a certain good when prices are rising because there is a high customer demand for that good.
Advantages and disadvantages of price legislation?
what is the advantages and disadvantages of price legistlation
What is price incentives?
Price incentives is included in price mechanism, that is refers in the competition process, the supply and demand of mutual connection, mutual constraints of the market price formation and operation mechanism.
What is Rationing as a function of price mechanism?
This is when consumers and producers respond to information( signalling) and incentive provided by the prices then scarce resources will be rationed between competing uses
Who has a feature of price mechanism?
teachers
