Producers recognize that controlling cost of

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Unformatted text preview: oduction is their primary line of defense in maximizing profits. Their secondary line of defense is seeking to have some control over the prices of the goods and services they produce, but this is a story for another day. Producers choose the mix of resources resulting in the least-cost combination of producing the goods while continuing to maintain a concern for quality of the finished product. Prices of relevant resources used in production helps answer this question. In conclusion, it is important to accentuate the importance of the function of price in the market system. Price drives almost every critical production and consumption decision. Who will receive the goods once they have been produced? Who will receive the goods and services once they have been produced? The market process and price (of the good or service) answers this question automatically in that those who can afford the goods will receive them. You and I can answer this question easily because we completely understand that we can have the goods and services if we can afford them within our budget. This is referred to as the rationing function of pr...
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This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.

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