How Markets Work - The Price Mechanism

This is a revision presentation on the price mechanism

The foundation of all AS microeconomics papers is an understanding of the price mechanism model and its limitations. Market prices ration, signal and allocate – hopefully you will be confident in explaining each of these functions. More importantly, this is a part of your revision when you can apply supply and demand concepts to analyse changes in market prices and consider some of their effects – this is the price mechanism at work. A change in price in one market will very likely affect related industries.