Price Mechanism Functions

Question 1

What is the incentive function in economics?

Answer 1

The incentive function refers to the mechanism that motivates individuals to act in a certain way, typically by offering rewards or penalties.

Question 2

True or False: The rationing function allocates scarce resources among competing uses.

Answer 2

True

Question 3

Fill in the blank: The signalling function of prices helps to convey information about ______ in the market.

Answer 3

supply and demand

Question 4

Which of the following best describes the role of the rationing function? A) Encouraging consumption B) Distributing limited resources C) Informing consumers

Answer 4

B) Distributing limited resources

Question 5

Short answer: How do incentive, rationing, and signalling functions interact in a market economy?

Answer 5

They work together to ensure resources are allocated efficiently, motivate consumer behavior, and provide information about market conditions.