a) Price mechanism

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Last updated 10:38 PM on 5/21/26
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4 Terms

1
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  • define price mechanism

  • the interaction of supply and demand to determine pricing and resource allocation

2
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  • define rationing

  • explain the process of the rationing mechanism

  • prices ration scarce resources

  • high demand → high price → resources rationed only to those who can afford them

3
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  • define signalling

  • explain the process of the signalling mechanism

  • prices provide information on which markets require more resources

  • high demand → high price → allocate resources to meet demand

4
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  • define incentive

  • explain the process of the incentive mechanism

  • prices incentivise producers to allocate resources to profitable markets

  • high demand → high price → allocate resources to maximise profit