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1.8 The market mechanism, market failure and government intervention in markets

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Question 14

In a free market economy, the price mechanism allocates scarce resources by

adjusting relative prices to signal changes in consumer preferences and reallocate factors of production.

establishing price ceilings to prevent external costs from exceeding private benefits.

ensuring that public goods are provided in sufficient quantities to satisfy society's needs.

lowering prices to ration demand when a shortage of a good occurs in the market.

1.8 The market mechanism, market failure and government intervention in markets Questions

  1. A Level
  2. /Economics
  3. /1.8 The market mechanism, market failure and government intervention in markets