4th December 2019


What is the price mechanism and how does it work?

In economics, a price mechanism is the manner in which the prices of goods or services affect the supply and demand of goods and services, principally by the price elasticity of demand. A price mechanism affects both buyers and sellers who negotiate prices.

People also ask, what is the price mechanism definition?

Definition of 'Price Mechanism' Definition: Price mechanism refers to the system where the forces of demand and supply determine the prices of commodities and the changes therein. It is the buyers and sellers who actually determine the price of a commodity.

What is the allocative function of price?

The rationing function of price: to distribute scarce goods to those consumers who value them most highly. The allocative function of price: to direct resources away from overcrowded markets and toward markets that are underserved.
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