Price Mechanism

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Define price mechanism.

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Economics Ankit Kumar 2 Answer 107 views 0

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    1
    April 8, 2017 at 9:41 pm

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    In economics, a price mechanism is the manner in which the prices of goods or services affect the supply and demand of goods and services, principally by theprice elasticity of demand. A price mechanism affects both buyers and sellers who negotiate prices.

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    April 8, 2017 at 10:00 pm

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    Price mechanism or market-based price system is the system in which the prices of commodities affect the demand and supply of goods and services. It affects both buyers and sellers who negotiate prices of goods or services. It comprises a wide variety of ways to match up buyers and sellers. Generally, price depends on buyer and seller.
    However, sometimes the government controls the price mechanism to make commodities affordable for the poor people too. In the above figure, red line denotes demand and violet line denotes supply. The point where demand and supply cut each other is the point of equilibrium.

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