The price mechanism dictates supply and demand in a market economy.

Question

Quizplus · Accepted Answer

The price mechanism is the way in which prices of goods and services are determined by the interaction of buyers and sellers in a market economy. As the demand for a product or service increases, the price is likely to go up, leading to an increase in supply as more sellers enter the market. If demand falls, the price is likely to go down, leading to a decrease in supply as sellers leave the market. Therefore, the price mechanism plays a crucial role in determining supply and demand in a market economy.

The Price Mechanism Dictates Supply and Demand in a Market