ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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higher prices encourage producers to allocate fewer resources to the production of the good.
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higher prices encourage consumers to economize by finding substitute goods
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higher prices encourage producers to allocate fewer resources to the production of other goods
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prices help people recognize market opportunities.
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Detailed explanation-1: -First, prices determine what goods are to be produced and in what quantities; second, they determine how the goods are to be produced; and third, they determine who will get the goods. The goods so produced and distributed may be consumer items, services, labour, or other salable commodities.
Detailed explanation-2: -If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.
Detailed explanation-3: -Market prices are dependent upon the interaction of demand and supply. An equilibrium price is a balance of demand and supply factors. There is a tendency for prices to return to this equilibrium unless some characteristics of demand or supply change.
Detailed explanation-4: -The law of supply states that a higher price leads to a higher quantity supplied and that a lower price leads to a lower quantity supplied. Supply curves and supply schedules are tools used to summarize the relationship between supply and price.