Effects of The 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 1970s.
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. Price mechanism is a system by which the allocation of resource and distribution of goods and services are made on the basis of relative market price
Read more about this topic: Price Mechanism
Famous quotes containing the words effects of, effects, price and/or mechanism:
“Like the effects of industrial pollution ... the AIDS crisis is evidence of a world in which nothing important is regional, local, limited; in which everything that can circulate does, and every problem is, or is destined to become, worldwide.”
—Susan Sontag (b. 1933)
“Oh that my Pow’r to Saving were confin’d:
Why am I forc’d, like Heav’n, against my mind,
To make Examples of another Kind?
Must I at length the Sword of Justice draw?
Oh curst Effects of necessary Law!
How ill my Fear they by my Mercy scan,
Beware the Fury of a Patient Man.”
—John Dryden (1631–1700)
“For what were all these country patriots born?
To hunt, and vote, and raise the price of corn?”
—George Gordon Noel Byron (1788–1824)
“The two elements the traveler first captures in the big city are extrahuman architecture and furious rhythm. Geometry and anguish. At first glance, the rhythm may be confused with gaiety, but when you look more closely at the mechanism of social life and the painful slavery of both men and machines, you see that it is nothing but a kind of typical, empty anguish that makes even crime and gangs forgivable means of escape.”
—Federico García Lorca (1898–1936)