PRICE MECHANISM Prepared by Murzakarimova P B

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PRICE MECHANISM Prepared by: Murzakarimova P. B.

PRICE MECHANISM • Price mechanism is an economic term that refers to the buyers and sellers who negotiate prices of goods or services depending on demand supply. A price mechanism or market-based mechanism refers to a wide variety of ways to match up buyers and sellers through price rationing.

PRICE MECHANISM DEPENDS OF SUPPLY AND DEMAND.

EFFECTS OF PRICE MECHANISM • Price Mechanism causes many changes in the economic environment. If there is an increase in demand, then prices will go higher causing a movement along the supply curve. An example of price mechanism in the long term is the oil crisis during the 1970 s. • The crisis caused more nations to start producing its own oil due to dramatic price increases of oil. Since more nations started to produce oil, the supply curve shifted more to the right meaning there was more supply of oil. • Price Mechanism affects every economic situation in the long term. Another good example of price mechanism in the long run is fuel for cars. If fuel becomes more expensive, then the demand of fuel would not decrease fast but eventually companies will start to produce alternatives such as biodiesel fuel and electrical cars.

The invisible hand – the workings of the price mechanism Adam Smith, one of the Founding Fathers of economics famously wrote of the “invisible hand of the price mechanism”. He described how the invisible or hidden hand of the market operated in a competitive market through the pursuit of self-interest to allocate resources in society’s best interest. This remains the central view of all free-market economists, i. e. those who believe in the virtues of a freemarket economy with minimal government intervention. The price mechanism is a term used to describe the means by which the many millions of decisions taken each day by consumers and businesses interact to determine the allocation of scarce resources between competing uses.

THE DEMAND FOR COMPUTER GAMES INCREASES AND AS A RESULT, PRODUCERS STAND TO EARN HIGHER REVENUES AND PROFITS FROM SELLING MORE GAMES AT A HIGHER PRICE PER UNIT. SO AN OUTWARD SHIFT OF DEMAND OUGHT TO LEAD TO AN EXPANSION ALONG THE MARKET SUPPLY CURVE. In the second example on the right, an increase in market supply causes a fall in the relative prices of digital cameras and prompts an expansion along the market demand curve

CONCLUSION: • Thus, a mechanism of price formation and price controls aimed at ensuring a high rate of intensification of production and contributes to improving its efficiency and standard of living, is a very important issue. A significant contribution to theory of prices and pricing have made such classics of economic thought, as William Petty, Adam Smith, Ricardo, Marx, Walrus, L. , Clark, A. Marshall, Pareto, and others. Their works cover a wide range of considered in the analysis of the economic category.

REFERENCES: • ru. wikipedia. org/wiki/Экономика • economics. wideworld. ru/ • kp. ru/daily/economics

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