Economics Ch. 6.1
Published on Nov 18, 2015
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MORE DECKS TO EXPLORE
PRESENTATION OUTLINE
PRICES AND SIGNALS
If prices act as "signals," do we all react to the signals in exactly the same ways?
Photo by Jordi Payà
ADVANTAGES OF PRICES
- The monetary value of a product as established by supply and demand
- Prices favor neither producer nor consumer (neutral)
- Unforeseen events affect the prices
- Prices are familiar & easy to understand
- Competitive markets find their own prices
Photo by Luis Argerich
ALLOCATIONS WITHOUT PRICES
Rationing-where the government decides everyone's fair share
Photo by Manoj Vasanth
PROBLEMS WITH RATIONING
- Everyone feels his/her share is not enough
- Administrative cost
- Impact on the incentive to produce
Photo by Kat
PRICES ACT AS A SIGNAL TO ALLOCATE RESOURCES BETWEEN MARKETS
- Oil prices effect consumers decisions
- SUV market first to feel
- Dealers offered rebates
- Makers reduced production, shifted to other thins
- Prices-a system that links all markets in economy
Photo by Ben Grey
