Price Mechanism

Price Mechanism

                Price Mechanism defined as price of goods and services acts according to demand and supply.Actually it describe the price of commodity by the buyers and sellers.In this price plays an important role towards functioning of consumers,producers.If the demand increases then simultaneously price also increases towards change in the supply curve.Based on market price ,resources and distribution takes place.

     Three main functions of price mechanism:-

                  1.Rationing function
                  2. signalling function
                  3.Incentive function

                          For example if the price of the petrol goes up then the companies start to producing electrical cars and bio fuel cars.This can be determined using the different factors like what to produce,determination of income distribution.Price mechanism is the new track from producers and consumers and consumers to producers and the any achievement for the factor services  can determine by this price mechanism.
   
                            price mechanism uses in the 1.Mixed economy
                                                                          2.Controlled economy
                                                                          3.To determine income distribution.