The Price SystemThe Price System

Or Price as the RegulatorOr Price as the Regulator

PricePrice

Price is the monetary value of a product Price is the monetary value of a product as establish by supply and demand.as establish by supply and demand.

Price is a signal that helps us make Price is a signal that helps us make economic decisions.economic decisions.

Prices are neutral because they favor Prices are neutral because they favor neither the producer nor the consumer.neither the producer nor the consumer.

Prices in a Market economy are Prices in a Market economy are flexible.flexible.

Prices help us decide the What, How, Prices help us decide the What, How, for Whom to produce.for Whom to produce.

Prices allocate resourcesPrices allocate resources

Price is a system Price is a system that links markets that links markets in the economy.in the economy.

Rationing , in Rationing , in contrast, lacks contrast, lacks incentive, is incentive, is expensive to expensive to administer , administer , wasteful and wasteful and unfair.unfair.

Market EquilibriumMarket Equilibrium

Equilibrium Price is the price Equilibrium Price is the price at which the number of units at which the number of units produced equals the number produced equals the number of units sold.of units sold.

Equilibrium Price means Equilibrium Price means that at this price there is that at this price there is neither a surplus nor a neither a surplus nor a shortage of the product shortage of the product

in the market.in the market.

Surplus is a situation in which the Surplus is a situation in which the quantity supplied is greater than quantity supplied is greater than

the quantity demanded.the quantity demanded.

A shortage is a situation in which the A shortage is a situation in which the quantity demanded is greater than the quantity demanded is greater than the

quantity supplied at a given price.quantity supplied at a given price.

Changes in Supply and Changes in Supply and DemandDemand

Changes in Supply and Changes in Supply and DemandDemand

Changes in Supply and Changes in Supply and DemandDemand

Changes in Supply and Changes in Supply and DemandDemand