Price mechanism and solutions - class-X

The reservation price for flowers are likely to stay low due to higher production and it has to be consumed in a short span of time otherwise it will be rotted.

In price mechanism,
prices of commodities in the market are determined by the forces of demand and
supply that generates open competition in the market which leads optimum distribution
of goods and services. 

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and the demand by the consumer sector i.e demand
will increase if price decreases and vice-versa which generates within the framework of a market. 

Factor market refers to those market where factor services i.e. factors of production like capital, land, labour, and entrepreneurship are bought and sold against some factor payments like interest, rent, wages, and profit.

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and the demand by the consumer sector i.e demand
will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions. 

In a free market economy, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads to optimum allocation and utilization of resources because the prices of the factor of production depends upon the demand and supply of the commodities produced by it. 

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. It also regulates the supply of resources in the economy as more resources are supplied if there is more demand for the commodity produced using it. 

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa which generates within the framework of a market.

In a market economy, prices of commodities in the market are determined by the forces of demand and supply that generates open competition in the market which leads to optimum utilization of scarce resources as the resources are utilized keeping in mind the demand by the consumer sector and profit made by it.  

In price mechanism, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads distribution of goods and services according to the purchasing power of an individual where the consumers have freedom of choice between how much they will spend on consumption of goods and services. 

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions.

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions.

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e. supply will
increase if price increases and vice-versa and the demand sector i.e. demand
will increase if price decreases and vice-versa. Therefore, it adds more flexibility to the market economy because in market economy prices affect by the forces of demand and supply.  

Factor remuneration refers to the payments which are done by the production sector to the private sector for hiring factor service i.e. capital, labour, land, and entrepreneurship in the form of interest, wages, rent, and profits respectively. 

Goods market refers to the market where goods and services which are required by the consumers are bought and sold against a common monetary measure i.e. rupees in case of India. 

In a free enterprise economy,
prices of commodities in the market are affected by the forces of demand and
supply that generates open competition in the market which leads to the survival of the fittest due to which profit maximization becomes the ultimate motive of all the producing sector. 

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa which determines the level of economic activity i.e. profitable activities in the economy with the accurate savings in the economy. 

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and the demand sector i.e demand
will increase if price decreases and vice-versa. Therefore for price mechanism to operate smoothly, government intervention needs to be avoided with free flow of all the resources required for the production of the demanded commodities.  

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and the demand sector i.e demand
will increase if price decreases and vice-versa. Therefore, price mechanism will operate only when the producer sector will efficiently anticipate the demand by the needs of the people and supply the commodities where cost in the generation of the commodities must be reflected in terms of opportunity cost. 

Capitalist economy has private ownership where utilization of resources takes place for private gains therefore in this kind of economy only those goods are produced which are in high demand in the market which is leads to open competition in the market where all the producer compete with each other to yield higher profits. 

Capitalist economy has private ownership where utilization of
resources takes place for private gains. Therefore in this kind of economy only those goods are produced which are in high demand in the market which is directly governed by the consumers. 

The cost of a commodity should always be reflected in terms of opportunity cost where the cost of the commodities supplied in the market should be reflected in terms of sacrifice of the resources of the society which are the next best alternative in the production process. 

Consumer is regarded as a sovereign in a market economy since it is believed that the supreme power to control market lies in the hands of the consumers. Consumer is the king pin of the market.In a market economy,
prices of the commodities in the market are affected by the forces of demand and
supply which depends upon the purchasing power of the consumer that generates open competition in the market. Therefore, consumers are known as sovereign in the market.

In a labour market, wages of the labour are decided on the demand and supply of the labour as if the demand of the labour increases their price also increases and vice-versa whereas if supply of the labour increases their price decreases and vice-versa. 

In Price mechanism price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and the demand sector i.e demand
will increase if price decreases and vice-versa. Therefore if there is any changes in the price, the available resource also changes which is reflected inthe profit margin. 

The consumers demand only those goods from which they are able to derive proper utility against which they pay prices. Therefore, if consumers taste and preference for the commodity is high they will derive more utility out of it and they will pay more price for it. 

In price mechanism, factor income directs the flow of factors of production in the market as if the income rises, the supply of the factors increases and if the income decreases, the supply of the factors decreases.

Factor of production contributes to the production of output and not to the marketing or selling of output. Therefore they are paid according to the number of units of output produced and not according to how many output sold. 

In a free enterprise economy,
prices of commodities in the market are affected by the forces of demand and
supply that generates open competition in the market which leads distribution
of goods and services according to the purchasing power of an individual which depends on the distribution of income. 

In price mechanism, factor income directs the flow of factors of production in
the market as if the income rises, the supply of the factors increases and if the income decreases, the supply of the factors decreases. 

Factor income directs the flow of factors of production in the market but it also contributes to the consumption expenditure or aggregate demand in the economy as if factor income increases the aggregate demand also increases and if factor income decreases the aggregate demand also decreases. 

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. This leads to distribution of goods and services according to the purchasing power of the individuals which brings inequality in the distribution channel. Therefore, only those goods are produced which are in high demand like luxurious goods etc. 

Price mechanism is also know as free enterprise mechanism as here the flow of goods and services in
the market is directed by the supply of the production sector and purchase by the demand sector. Therefore all the economic agents are free here with mutually interdependent relations. 

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Therefore, it coordinates and organize activities in a free enterprise economy. 

The central problem of "How to produce?" which is faced by the economy where the economy consider either labour intensive techniques or capital intensive techniques for the production of goods and services in the economy depending upon the available resources in the economy. Therefore, a producer will go with the technique which is cheapest among all the techniques of the production. 

In price mechanism, the market decides the price of each and every commodity therefore producers become the price taker but they try to influence consumers by the way of advertisement, propaganda and salesmanship so that every consumer in the market become their customer which break the laws of consumer sovereignty in the economy. 

Adam Smith was a Scottish economist who emphasized on price mechanism as a invisible hand that aims at both economical i.e. personal gains as well as social i.e. human gains welfare as it is not influenced by any intervention from any party not involved. 

The central problem of "How to produce?" which is faced by the economy where the economy consider either labour intensive techniques or capital intensive techniques for the production of goods and services in the economy depending upon the available resources in the economy is easily solved in a price mechanism economy as resources are utilized here depending upon the demand and supply of commodities in the market. 

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector and purchase by the demand sector. Therefore for price mechanism to operate freely, the market should be perfectly competitive without any intervention with stability in the demand and supply situation that depends upon the distribution of income and wealth in the economy.

In Price mechanism price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and purchase by the demand sector i.e demand
will increase if price decreases and vice-versa. But producer sector is in high dominance compared to the consumer sector as they had to supply the goods to the market so they fraudulently affect the price of the goods by their operations. 

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and purchase by the demand sector i.e demand
will increase if price decreases and vice-versa. So due to this freedom policy, there are many fraudulent practices that take place in the market which makes the economy very unstable. 

Producers produce goods and service for them who have large money power. Thus, the price mechanism cannot ensure social justice rather it widens inequality in the distribution of income and wealth the rich get richer and the poor poorer. 

Price solves the problem of what to produce and in what quantities. There are unlimited wants but there is a scarcity of productive resources. If the price is high the producers will be willing to supply more but the consumers will be buying less and vice versa.

The correct answer is A.

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. This leads to distribution of goods and services according to the purchasing power of the individuals which brings inequality in the distribution channel which is inherited by generation to generations. 

Capitalist economies has private ownership where utilization of resources takes place for private gains, therefore here price mechanism takes place very smoothly without any government intervention in all types of private business that operates in a capitalist economy. 

Since the population is so huge that if any single private producer will come with a public utility product, it will require huge investment to satisfy all wants. Moreover, compared to other business the returns are very less in such kind of business as market price cannot be measured due to very widespread of distribution and consumption. 

A reservation (or reserve) price is a limit on the price of a good or service. On the demand side, it is the highest price that a buyer is willing to pay. On the supply side, it is the lowest price at which a seller is willing to sell a good or service.

According to the law of supply, when the price of a commodity increases, the supply of the commodity increases and when the price of the commodity decreases, the supply of the commodity decreases. We can see that the law of supply has a direct relationship between supply and price. Hence, other factors remaining constant, when price of a commodity rises, there is expansion of supply.

In case of substitutes if the price of one commodity increases the demand for the other good will increase. Because there is an increase in the demand of that other good there will occur a increase in price to bring the market to equilibrium. 

Price ceiling is the maximum price the seller can charge to the customer. Government imposes price ceiling to protect the consumers. Price ceiling will lead to shortage as demand will exceed supply. This leads to black marketing, rationing by fist come first serve. Price ceiling is giving goods at a price that is fixed by government, the supplier cannot charge beyond that price. Hence, some price is charged even it is minimal but is not free of cost. Hence all the statements except D is incorrect. 

Household sector consumes various resources which are limited in means from the society. Therefore, the problem of these limited resources are faced by the households because their demands are unlimited and by the society as well because the society has to preserve these resources for future needs. 

If resources are abundant then while producing extra unit of a commodity the producer does not has to shift resources from production of another commodity and there will be no decrease in the production of another commodity. So the opportunity cost will remain the zero in this case. 

Law of Variable Proportions is applicable to - short rum. Law of variable proportion exhibits the relationship between the change of output in respect to the change in only one variable factor, only in short run economy. It involves three phases of production, namely, increasing returns, diminishing returns and negative returns.

Tomatoes and tomato puree(sauce) are example of substitutes.

The slope of
production possibility curve represents the marginal opportunity cost, which refers to the
additional sacrifice that would have to be made when resources and technology are shifted from production of one commodity to the other owing to limited resources. This opportunity cost between two goods is increasing which is denoted through the negative slope of PPC.

External economies of scale take place when an entire business grows larger and firms benefit from subordinate long-run average costs. External economies of scale can also be referred to as positive external benefits of industrial development.

External economies of scale describe comparable conditions, only for complete manufacturing instead of a company. For example, if the city creates an enhanced transportation network to service a particular industry, then all companies in that industry will benefit from the new transport network, and experience decrease production costs.

The correct option is C.

Inflation which is often expressed in percentage is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time continuously which indicates a decrease in the purchasing power of a nation's currency.

Resources refers to the resources which are limited in quantity and have alternative uses in production of various commodities. So the problem of these scarce resources is reflected in the aggregate supply of the economy which is also limited owing to limited source of inputs. 

When some resources are shifted from Use-1 to Use-2( given technology and resources) the marginal rate of transformation increases, as per the concept of Production possibility curve.Since resources are
use specific, therefore every time when one more unit of a commodity is
produced more units of the other commodity is sacrificed that results in
increasing marginal opportunity cost or marginal rate of transformation.  

Opportunity cost is an avoidable cost- this is a false statement, since opportunity cost cannot be avoided.In an economy, every goods and services has an alternative available. Opportunity cost of
production of a commodity refers to the cost which the producer has to
sacrifice in terms of the next best alternative which could be produced out of
that cost in order to produce every unit of the given commodity. Therefore, to produce every commodity producer has to sacrifice some units of the other commodity. 

In a market economy,
prices of commodities in the market are affected by the forces of demand and
supply that generates open competition in the market which leads distribution
of goods and services according to the purchasing power of an individual where the consumers have freedom of choice between how much they will spend and how much they will save. 

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and the demand sector i.e demand
will increase if price decreases and vice-versa. Since price mechanism operates without government intervention, there is need for developed legal system in the economy so that there are less chances of fraudulent practices in the market. 

Price mechanism
refers to the mechanism where price directs the flow of goods and services in
the market as it directs the supply by the production sector i.e supply will
increase if price increases and vice-versa and the demand sector i.e demand
will increase if price decreases and vice-versa. Therefore, it determines the overall production in the economy that also signifies technological development and investment done. Moreover, it determines the consumption expenditure in the economy through aggregate demand which also signifies the overall savings in the economy. 

The imposition of price ceiling on monopoly's price will affect his equilibrium output and price. A monopoly is a price maker and influences the market as there are no close substitutes or competitors of the monopolist. By imposing a price restriction the government is restricting the price and there by converting the monopoly market like a competitive one. Hence, the equilibrium output and price will change because of the price ceiling. 

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided by allocating resources for the production keeping in mind the needs of the people i.e. consumer goods and to satisfy their wants.

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided keeping in mind the needs of the people i.e. consumer goods and national priorities i.e. capital goods. 

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided by allocating resources for the production keeping in mind the needs of the people i.e. consumer goods and to satisfy their wants. 

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the following

• What to produce? Consumer goods or capital goods?
  
• How to produce? Using labour or capital?
  
• For whom to produce? Rich people or poor people?
  

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority which is the government that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided by allocating resources for the production keeping in mind the needs of the people i.e. consumer goods and to satisfy their wants.

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'How to produce? Using
labour or capital intensive techniques?' which is decided by allocating resources for the production keeping in mind the most efficient technique that will maximize the output of the economy. 

In a mixed economy, price mechanism are intervened by the government through many policies which includes industrial policy i.e. industrial acts, wage rate system etc, fiscal policy i.e. taxation policy on goods and services, and monetary policy i.e. central bank's qualitative and quantitative policy.

In a socialist economy, the price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices.

In a socialist economy, the price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices.

Capitalist economies has private ownership where utilization of resources takes place for private gains, therefore here decision regarding the distribution of income and wealth is taken on the basis of the purchasing power of an individual where the private investors gain the maximum. 

In a mixed economy, private decisions are intervened by the government due to which all the major economic decisions related to economic development is taken by the government i.e. public sector which includes economic infrastructure, development of health and education etc. 

In a mixed economy, private decisions are intervened by the government due to which there is problem in price mechanism where prices of a commodities are determined by the forces of demand which involves consumers and supply which involves producers and labours with exception set by government on some basic commodities. 

In a mixed economy both private as well as public enterprises utilize the resources for the production of goods and services in  the economy for personal as well as social gains where government audits the overall production to ensure adequate availability of goods and services in the economy. 

In a mixed economy, the public sector price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices.

In a private sector of a mixed economy, price mechanism takes a very prominent role as in such sectors price directs the
flow of goods and services in the market as it directs the supply by the
production sector i.e supply will increase if price increases and vice-versa
and purchase by the demand sector i.e demand will increase if price decreases and
vice-versa. 

In a socialist economy, the price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices. 

In a mixed economy, public sector resolves the problem of 'how to produce?' keeping in mind the social welfare of the economy which includes overall economic growth and development, less input and factor prices for the availability of resources and generation of employment opportunities to eradicate poverty from the economy. 

In a socialist economy, both private as well as government organisations utilize resources and distribute them for personal as well as social welfare. Society is given more importance as government handles all central problems of the economy. So usually in socialist economy, private property are abolished for social welfare and to bring in equality in the social and economic status of the people.