2006-10-17 11:14:21 · 5 answers · asked by army_strong_4u 1 in Social Science ➔ Economics
you'll need to be a bit more specific
2006-10-17 11:16:08 · answer #1 · answered by Always Right 7 · 0⤊ 0⤋
The price system , via the demand/offer system, defines the fundamentals economic issues of
"What will be produced?",
"How will it be produced?" and
"For whom will it be produced?"
(Samuelson, Paul - "Economics, An Introductory Analysis" - 1964)
In the mid/long term it assures that the manufacturing goods are used more efficiently, meaning by efficiency the better satisfaction of demand.
The products more required (in relation to supply) will see an increase in price. As a consequence, the profit of producing them will go up, and the supply will also grow, reducing the price.
The opposite happens also.
It is like the force of gravity forcing water to equalize levels in two tanks, looking for stability. (wow! I am not a poet!)
Without a free price system (as it can be seen in many underdeveloped markets) resources are assigned inefficiently, promoting poverty. They produce what they should not, and viceversa.
2006-10-21 06:01:54 · answer #2 · answered by oldmarketeer 3 · 0⤊ 0⤋
A price is simply a rate of exchange between traded goods. Prices provide the relative value of all goods within a market.
Markets adjust prices to reflect shifts in relative value.
2006-10-17 20:29:15 · answer #3 · answered by GreenManorite 3 · 0⤊ 0⤋
Price doesn't dictate supply. It determines demand. If a price is too low then demand will increase until there is a shortage of supply. Then prices will go up until demand falls to the point of equillibrium at which the supply and demand levels intersect at the perfect price level.
2006-10-17 18:24:08 · answer #4 · answered by Anonymous · 0⤊ 1⤋
The theory is that price dictates supply.
2006-10-17 18:17:50 · answer #5 · answered by Kenneth H 5 · 0⤊ 1⤋