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Market Equilibrium
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Terms in this set (12)
Price convey info to consumer and producers- Prices signal the opportunity cost of an item (low price=low opportunity cost), tells producers what consumers want, sends consumers signals (high price=short supply), and send messages about products and their intended markets.

Prices Create Incentives to Work and Produce-Prices function as an incentive because they represent the potential for profit. Rising prices motivate existing producers to produce more and motivate new producers to enter the market. Falling prices do the opposite. Prices in the form of salaries motivate workers. Higher salaries motivate workers to enter the workforce, whereas falling prices do the opposite.

Prices Allow Markets to Respond to Changing Conditions- Prices allow markets to adjust quickly when major event interfere with production and movement of goods

Prices Allocate Scarce Resources- Prices guide resources to their most efficient uses