The document discusses the price mechanism, which refers to how prices of goods and services affect their demand and supply. The price mechanism influences both buyers and sellers as they negotiate prices. It allocates scarce resources efficiently through market signals and incentives, rationing supply when demand is high. When demand increases, prices rise, causing movement along the supply curve. As an example, the 1970s oil crisis caused oil prices to spike, incentivizing more nations to produce their own oil and shifting the supply curve rightward over the long term.

1. PRESENTATION ON:
Price Mechanism

2.  Introduction to price mechanism.
 What is price mechanism.
 Functions of price mechanism.
 Effects of price mechanism.
 Example for price mechanism.

3. Price mechanism is an economic term that refers to the
manner in which the prices of commodities affect the
demand and supply of goods and services.
 Price mechanism affects both buyers and sellers who
negotiate prices of goods or services.
A price mechanism or market-based mechanism refers
to a wide variety of ways to match up buyers and
sellers through price rationing.

4. The price mechanism
describe the means by
which million of decisions
taken by consumer and
business interact to
determine the allocation of
scarce resources between
competing uses.

5. i. Allocate: The market mechanism allocates scarce
resources.
ii. Ration : price serve to ration scarce resources
when demand outstrips supply.
iii. Signal : Market prices adjust to demonstrate
where resources are required, and when they
are not.
iv. Incentive : When the price of a product rises, the
quantity supplied increases, this is due to the
incentive function.

6.  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.

7.  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.

9. Thank
You.
By Shahrukh.