Quizzes & Activities
The Price Mechanism (Revision Quizlet Activity)
- AS, A Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 5 Jan 2022
Here are sixteen key terms linked to the important topic of the Price Mechanism.
Key terms to revise
Asking price: Minimum price at which a security, commodity or currency is offered for sale on a market
Black market: Illegal market in which the market price is higher than a legally-imposed price ceiling
Cyclical demand: Demand that varies depending on the stage of the business cycle an economy is in
Disequilibrium: Prices where demand and supply are out of balance
Excess demand: Difference between the quantity supplied and the higher quantity demanded when price is set below the equilibrium price
Excess supply: When there are unsold goods at the current market price
Inventories: Unsold products, finished and unfinished, and the raw materials used to make them.
Invisible hand: How a market operates through the pursuit of self-interest to allocate resources in society's best interest.
Market incentives: Signals that motivate actors to change their behaviour perhaps in the direction of greater efficiency or profit
Price mechanism: Means by which decisions of consumers and businesses interact to determine the allocation of resources
Rationing function: A way of allocating scarce goods and services when market demand exceeds available supply
Shortage: Situation in which quantity demanded is greater than quantity supplied
Signalling function: When a changing price in a market sends important information to BOTH producers and consumers.
Utility: Measures the satisfaction that we get from purchasing and consuming a good or service.
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