Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 4 - Part II - The Market Forces of Supply and Demand - Questions for Review: 9

Answer

Prices play a vital role in market economies because they can make markets reach equilibrium. If the prices differ from its equilibrium level, quantity supplied and quantity demanded are not equal. Furthermore, a different price on equilibrium brings shortage or surplus to the market.

Work Step by Step

Prices serve as an indicator that leads into economics decisions and allocates scarce resources.
Update this answer!

You can help us out by revising, improving and updating this answer.

Update this answer

After you claim an answer you’ll have 24 hours to send in a draft. An editor will review the submission and either publish your submission or provide feedback.