Question

2. Explain the four characteristics of the price system.

3. Why is the price system an efficient way to allocate resources?
4. How do prices serve as signals and incentives to producers to enter a
particular market? to leave a certain market?
5. How does the story of Dell Inc. demonstrate the effects of
competitive pricing? in book of economics 174-178 pg.
High-school

Answer 1

1-The four characteristics of the price system are that it is neutral, market driven, flexible, and efficient. It is neutral because prices do not favor the producer or the consumer because the they both make choices that determine the equilibrium price.

2-Why is the price system an efficient allocator of economic resources? Prices are neutral, which means they are equally fair to both consumers and producers. They are flexible which means they can adapt to changing economic conditions. Prices are familiar which means that everyone understands how they work.

3-how do prices serve as signals and incentives to producers to leave a particular market? it showed that when a strong competitor offers similar products for lower prices other producers must also lower their prices. Less efficient companies were driven from the market.

4-demonstrates the effects of competitive pricing because it shows how the company strategically lured customers away from rival producers while still making the highest profit.

Step-by-step explanation:

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