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SingaporeEconomicsQuick questions
The Price Mechanism and Its Applications
Quick questions on Functions of the price mechanism explained: H2 Economics
5short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is the price mechanism as a coordinator?Show answer
In a market economy no one decides what gets produced; prices do the coordinating. They perform three closely linked functions.
What is the rationing function?Show answer
Prices ration scarce goods. When something is scarce, its price rises, and the higher price reduces quantity demanded until it matches the available supply. The good is thereby allocated to those willing and able to pay the most for it.
What is q1?Show answer
Name the three functions of the price mechanism. [2 marks]
What is q2?Show answer
Explain the rationing function when a good becomes scarce. [3 marks]
What is q3?Show answer
Explain why price rationing can be efficient but inequitable. [3 marks]
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