--%>
Assignment Help - homework help

Prices are the automatic regulator

“Prices are the automatic regulator that tends to keep production and consumption in line with each other.”  Explain.

E

Expert

Verified

When demand increases, prices rise.  This induces producers to increase the quantity supplied as they move up their supply curves toward the new (higher) equilibrium point. When demand decreases the same happens in reverse.

When supply increases, prices drop.  This stimulates buyers to raise the quantity demanded as they move down their demand curves toward the new (lower) equilibrium point.  The same happens in reverse when supply decreases.

In each case, it is the change in price caused by the change in demand or supply that brings about the change in quantity supplied (in the case of a change in demand) and a change in quantity demanded (in the case of a change in supply).  Thus, price is the automatic regulator that keeps production and consumption in line with each other.

   Related Questions in Business Economics

  • Q : What are the determinants of demand

    What are the determinants of demand?

    		•
  • Q : Example of self interest to define

    The concept of _____ was demonstrated by _____ along with the quotation, “The defeat of a bit finger would remain the average European from sleeping which night,... but, given he never saw them, he will snore along with the most profound security over the loss o

    		•
  • Q : Perfect Competition leads to Allocative

    A perfectly competitive industry achieves allocative efficiency since: w) goods and services are produced at the lowest possible cost. x) services and goods are produced up to the point where the last unit gives a marginal benefit to consumers equivalent to the margin

    		•
  • Q : What are economic resources What are

    What are economic resources? What are the major functions of the entrepreneur?

    		•
  • Q : Illustrate Scarcity and choice of

    Illustrate Scarcity and choice of Economic Perspective?

    		•
  • Q : Problem regarding private firms I have

    I have a problem in economics on Problem regarding private firms. Please help me in the following question. The mass of U.S. output is generated by: (i) Producer cooperatives. (ii) Non-profit organizations. (iii) Private firms. (iv) Government agencie

    		•
  • Q : Production function for the game

    Question Can you describe what the production function for the game looks like? (How are labour, capital and resources combined? Are there constant, increasing or decreasing returns to scale?) Answer

    Q : Changing rates of Appreciation and

    Elucidate the changing rates of Appreciation and Depreciation?

    		•
  • Q : Technology in production Drawing a

    Drawing a production possibilities frontier needs the supposition that: (1) Decision makers encompass discretion over resource accessibility. (2) Technology is constant. (3) Income is fairly distributed. (4) Resources are considerably diverse. (5) At least three goods

    		•
  • Q : How market system promotes

    How market system promotes technological improvements?

    		•