Explain Price mechanism?

1.	Explain Price mechanism?
Answer» 1. Price mechanism provides for the automatic adjustment among price, demand and supply in a Laissez Faire economy. 2. The producers and consumers adjust their supply and demand based on price changes. 3. There is no such mechanism in a planned economy. 4. Advance calculations in a precise manner are impossible to make decisions regarding the consumption and production. 5. It is also very difficult to put the calculations into practice under planning. 6. Excess supply and excess demand can also happen in the market oriented economy. 7. Infact it has happened in many expitalistic economies, including the US.

Answer»

1. Price mechanism provides for the automatic adjustment among price, demand and supply in a Laissez Faire economy.

2. The producers and consumers adjust their supply and demand based on price changes.

3. There is no such mechanism in a planned economy.

4. Advance calculations in a precise manner are impossible to make decisions regarding the consumption and production.

5. It is also very difficult to put the calculations into practice under planning.

6. Excess supply and excess demand can also happen in the market oriented economy.

7. Infact it has happened in many expitalistic economies, including the US.

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