4. The Market Mechanism, Market Failure and Government Intervention - The Price Mechanism Flashcards
1
Q
What are the advantages of the price mechanism?
A
Encourages competition - firms have to work to reduce prices to get market sharesGives consumers control - they can choose what they want to consume at given priceEffective allocation of resources - mostly
2
Q
What are the disadvantages of the price mechanism?
A
May indirectly cause UE - firms need to compete on price - machines replace humansExcludes poor people from the market - each £ is a economic voteVery impersonal & objective - maybe too mechanical for some situations
3
Q
Where wouldn’t you want to extend the current price mechanism system to?
A
Situations with social importance - healthcare - specifically blood transfusions - here its about public good not economics
