Please enable JavaScript.
Coggle requires JavaScript to display documents.
Economics 1.2.7 - Coggle Diagram
Economics 1.2.7
incentive
-
lower prices encourages consumers to buy more as the marginal utility gained per £ increases compared to other goods
higher prices encourage consumers to buy less as the marginal utility gained per £ decreases compared to other goods
-
lower prices discourages production due to lower profit margins, so firms may exit the market
rationing
-
if too many consumers demand a good but supply is scarce, then prices will be high and limited to those who can afford to pay a high price
if demand is lower than supply, prices will be low in order to sell a high volume of goods
-
-