Answer:
Based on given information, below are answers to each question.
Step-by-step explanation:
Price is the amount of money or other goods and services that must be given up in exchange for a good or service. Prices give consumers and producers signals by providing information about the scarcity or abundance of a product or service in the market. When prices are high, consumers receive a signal to reduce their demand, while producers receive a signal to increase their supply. Conversely, when prices are low, consumers receive a signal to increase their demand, while producers receive a signal to reduce their supply.
The advantages of prices are
- Prices help to allocate resources efficiently by directing them to their most valuable use.
- Prices allow for decentralized decision-making, which allows individuals to make choices that are in their best interest.
- Prices provide incentives for producers to minimize their costs and maximize their profits.
- Prices help to communicate information about the relative scarcity or abundance of goods and services in the market.
- Prices are flexible and adjust to changes in supply and demand.
Rationing is the distribution of goods and services based on a set of criteria, such as need or merit. The problems with rationing include:
It is difficult to determine who should receive the goods or services.
Rationing can create inefficiencies and waste, as those who do not receive the goods or services may still have a demand for them.
Rationing can be unfair, as those who are deemed undeserving may be denied access to the goods or services.
The price system is a mechanism by which the forces of supply and demand determine the prices of goods and services in the market. It helps to allocate resources both within and between markets by providing information about the relative scarcity or abundance of goods and services.
The goals of buyers in a market economy are to purchase goods and services that will satisfy their wants and needs at the lowest possible price. The goals of sellers in a market economy are to sell goods and services at the highest possible price while maximizing their profits.
Market equilibrium is the point where the quantity demanded of a good or service is equal to the quantity supplied, resulting in a stable price. At this point, there is no excess demand or excess supply.
A surplus occurs when the quantity supplied exceeds the quantity demanded at the current price. Price is above equilibrium when a surplus is present. A surplus is represented by a horizontal line above the equilibrium point on a supply and demand graph.
A shortage occurs when the quantity demanded exceeds the quantity supplied at the current price. Price is below equilibrium when a shortage is present. A shortage is represented by a horizontal line below the equilibrium point on a supply and demand graph.
A price ceiling is a government-imposed limit on the price of a good or service. Examples include rent control and price controls on prescription drugs. The consequence of a price ceiling is that it creates a shortage, as the quantity demanded exceeds the quantity supplied at the government-mandated price.
A price floor is a government-imposed minimum price for a good or service. Examples include minimum wage laws and price supports for agricultural products. The consequence of a price floor is that it creates a surplus, as the quantity supplied exceeds the quantity demanded at the government-mandated price.
The government attempts to manage prices in order to achieve certain economic or social objectives, such as promoting equity, stabilizing prices, or reducing inflation. Markets "talk" and affect the price of economic staples such as gold, stocks, and oil through the forces of supply and demand. If demand for these commodities increases, the price will increase as well, while if supply increases, the price will decrease.