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Chapter 5, Section 1
Transcript of Chapter 5, Section 1
2) Benefits of the price system?
3) Limitations of the price system? Benefits -Information
-Flexibility Benefits -Information
-Flexibility ~Allows businesses to make decisions on how much to charge for products
~Informs consumers of the relative worth of goods and services ~With price incentives, producers and consumers can easily exchange goods and services
~Generally,law of supply and law of demand assist with incentives
~High prices with low costs encourages producers to provide more goods and services ~By encouraging participation in markets, variety of choices increases
~In competing with one another, the manufacturers create hundreds of different products, trying to match consumers preferences and generate the most profit ~Quickly delivers information to producers and consumers
~Provides a wise use of resources
~With high prices, the producers will use the resources
~With low prices, the producers will stop using resources to provide goods and services people don't want ~Greatest strength is its ability to deal with change, such as frost in Florida and flash floods in New York.
~ If prices don't rise demand would be higher than quantity supplied. Limitations -Externality
-Instability ~The production of goods sometimes results and side effects for people are not directly connected with the production or consumption of goods.
~Negative and positive side effects
~Negative - someone who does not make/consume it but still pays->responsible for outside events
~Positive-benefits without buying/selling products ~Any good or service that is consumed by all members of a group ~Flexibility is a good thing, but it can also make it unstable.
~A drop in prices could force producers to go out of business Think Pair Share What is the role of the price system? The End =) The Price System
Kia Hall, Jon Ganun, Sarah Westman