Price mechanism
What Price mechanism means in Economics GCSE, as defined for AQA, Pearson Edexcel.
Definitions of Price mechanism
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Reference: AQA
The market operates through wage signals, where a shortage of workers makes wages rise, signalling more people to train and employers to use labour more efficiently.
If the wage is above equilibrium, excess supply of labour puts downward pressure on wages; if below equilibrium, excess demand forces employers to raise wages.
The signalling system that can fail to reflect the true social costs and benefits, sending incorrect signals to producers and consumers.
The process by which excess demand or excess supply at the original price drives the price to a new equilibrium point.
The system in a market economy whereby changes in price in response to changes in demand and supply have the effect of making demand equal to supply.
Topics that use Price mechanism
- Equilibrium price (AQA GCSE)
- Misallocation of resources (AQA GCSE)
- The labour market (AQA GCSE)
- The market system (Pearson Edexcel GCSE)
Related terms
- Equilibrium price
- Market equilibrium
- Price determination
- Deductions
- Demand
- Derived demand
- Determinants of supply and demand
- Disequilibrium
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