2-5-19 - ● Advantages of Prices ○ Price is the...

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Advantages of Prices Price is the monetary value of a product as established by supply and demand. This works as signals to buyers and sellers High prices are signals for producers to produce more and for buyers to buy less… Low prices are signals for producers to produce less and for buyers to buy more… Prices have 4 significant advantages in the economy Prices in a competitive market economy are neutral because they favor neither the producer more the consumer Prices are also flexible in a market economy In case of emergency or war prices will shift, but they will return to normal rates eventually, allowing the market to absorb emergencies In addition, when prices on a scarce item are high this will attract more producers to make money on those products As more products enter the market competition will occur and the item will soon not be scarce driving prices lower Prices also have no fist of administration
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