+ves and -ves of market systems

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Market systems

What is a market?

  • A market is where buyers and sellers meet to trade or exchange products.
  • The 'clearing price', 'market price' and 'equilibrium price' are all the same thing.
  • When the suppliers cost is equal to the consumer's benefit, then a sale will be agreed. 
  • This clears the market.
  • There is a lot of price fluctuation in competitive markets to acheive this market price.

The role of price

  • the price mechanism transmits info about 'values' between b&s, such as the cost of prod.
  • Price has 3 roles: Signalling, rationing and incentivising.

Allocation

Rationing

Signalling

Incentivising

Advantages of free market systems:

  • Consumers…

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