--%>

Signals that guide economic decisions

In market economies, what are the signals which guide economic decisions?

E

Expert

Verified

In market economies, prices are the signals which guide economic decisions and thus allocate scarce resources. For each and every good in the economy, the price makes sure that supply and demand are in balance. The equilibrium price then finds out how much of the good buyers chooses to buy and how much sellers select to produce.

   Related Questions in Macroeconomics

  • Q : Limitations of using GDP as an index of

    What are the limitations of using GDP as an index of welfare of a country?A) The N.I. figures provide no indication of the population, skill and resource of the country. Thus the levels of welfare stay low.B) A higher N.I. migh

  • Q : Aggregate Expenditure model Describe

    Describe Aggregate Expenditure model and also state AD/AS model?

  • Q : Explain Shut Down Price Explain the

    Explain the term Shut Down Price? Illustrate it.

  • Q : GDP gap "The economic cost of

    "The economic cost of unemployment is measured by the GDP gap." Explain this statement. ?

  • Q : Okuns law Describe Okun's law ? Give an

    Describe Okun's law? Give an illustration of how it works.

  • Q : Problem on equivalent Consumer Surplus

    Tom reimburses $5.00 for a ticket to see a present hit movie. If Tom was willing to reimburse up to $7.00 for that ticket, his consumer surplus equals: (1) $5.00 (2) $2.00 (3) $7.00 (4) Tom does not receive any consumer surplus as he purchased the ticket.

  • Q : What is Bank rate Bank rate : This is

    Bank rate: This is the rate at which the central bank loans money to commercial bank.

  • Q : Tax shifting forward totally A tax is

    A tax is shifted forward when the tax burden causes the: (w) consumers to pay higher prices. (x) lower purchasing power for the party bearing the legal incidence. (y) workers to experience lower take home wages. (z) decreased dividends to corporate st

  • Q : Inflation Effect The economic effects

    The economic effects of inflation are all pervasive. It affects all those who depend on the market for their livelihood. The effects of inflation may be favorable or unfavorable, and low or high depending on the rate of inflation. For example a galloping the hyper inf

  • Q : If the MPC is .70 and investment

    If the MPC is .70 and investment increases by $3 billion, the equilibrium GDP will: