Markets: Mechanism, Failure & Intervention (AQA A-Level Economics): Flashcards
📚Flashcards
Practise the cards
10 cards from this deck
ShowHide
Practise the cards
10 cards from this deck
Four key functions of prices
Four key functions of prices
Signalling, incentive, rationing, allocative
Signalling function of prices
Signalling function of prices
Communicates vital info to buyers and sellers
Incentive function of prices
Incentive function of prices
Motivates people to alter their economic behaviour
Rationing function of prices
Rationing function of prices
Rising prices reduce/eliminate excess demand
Allocative function of prices
Allocative function of prices
Directs scarce resources between different markets
Invisible hand of the market
Invisible hand of the market
Coordination of activity without central direction
Consumer sovereignty
Consumer sovereignty
Consumer holds most power in determining what gets produced
Producer sovereignty
Producer sovereignty
Firms determine what's available (e.g., in monopoly)
Value neutrality of price mechanism
Value neutrality of price mechanism
No regard for equality or fairness in allocation
Government failure
Government failure
Intervention produces worse outcome than the market failure