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 - Page 86: 9


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.
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