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Price Mechanism

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Price Mechanism

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Explain the workings of demand and supply

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Recommended age: 15 years old
8 times made

Created by

patrick livingstone
patrick livingstone
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Price Mechanism Online version

Explain the workings of demand and supply

by patrick livingstone
1

manufacturers negative messages signal 'consumers' market unemployed

Price changes send contrasting to consumers and producers about whether to enter or leave a market . Rising prices give a to consumers to reduce demand or withdraw from a market completely , and they give a signal to potential producers to enter a . Conversely , falling prices give a positive message to consumers to enter a market while sending a signal to producers to leave a market . For example , a rise in the market price of 'smart' phones sends a signal to potential to enter this market , and perhaps leave another one . Similarly , the provision of 'free' healthcare may signal to that they can pay a visit to their doctor for any minor ailment , while potential private healthcare providers will be deterred from entering the market . In terms of the labour market , a rise in the wage rate , which is the price of labour , provides a signal to the to join the labour market . The signalling function is associated with shifts in demand and supply curves .

 
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