The Price System Or Price as the Regulator. Price Price is the monetary value of a product as establish by supply and demand. Price is the monetary value.

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Presentation transcript:

The Price System Or Price as the Regulator

Price Price is the monetary value of a product as establish by supply and demand. Price is the monetary value of a product as establish by supply and demand. Price is a signal that helps us make economic decisions. Price is a signal that helps us make economic decisions. Prices are neutral because they favor neither the producer nor the consumer. Prices are neutral because they favor neither the producer nor the consumer. Prices in a Market economy are flexible. Prices in a Market economy are flexible. Prices help us decide the What, How, for Whom to produce. Prices help us decide the What, How, for Whom to produce.

Prices allocate resources Price is a system that links markets in the economy. Price is a system that links markets in the economy. Rationing, in contrast, lacks incentive, is expensive to administer, wasteful and unfair.

Market Equilibrium Equilibrium Price is the price at which the number of units produced equals the number of units sold. Equilibrium Price is the price at which the number of units produced equals the number of units sold.

Equilibrium Price means that at this price there is neither a surplus nor a shortage of the product in the market.

Surplus is a situation in which the quantity supplied is greater than the quantity demanded.

A shortage is a situation in which the quantity demanded is greater than the quantity supplied at a given price.

Changes in Supply and Demand

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