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Question
______________ is the mechanism in which prices play a key role in directing the activities of producers, consumers and resource suppliers.
______________ is the mechanism in which prices play a key role in directing the activities of producers, consumers and resource suppliers.
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Solution
The correct option is A Price mechanism
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. 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.
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