Macro and Microeconomics Essay Example | Topics and Well Written Essays - 2000 words

Macro and Microeconomics - see ExamplePrice mechanism therefore, solve the problem of allocating scarce resources by ensuring they are allocated through tilt in a free market.Moreover, cost mechanism helps industries to produce efficient product that of high quality. The controversy between firms ensures that the most efficient remain on the market while its edges others that are inefficient push through of the market (Moon 2013). Efficient firms produce quality goods at a cheaper price compared to the inefficient ones. The high appeal of production makes inefficient industries set a price that will cover the cost of production and so they price at a higher price than efficient firms. The high priced goods become uncompetitive in a free market and draw the firm out of business (Mukhopadhyay 2).Price also serves the authority of discounting to determine the cost as well as the amount or size of a commodity. However, price comprises the joint charge of goods and the derive att ached to it. Therefore, price serves to determine the amount to be produced and the effectiveness of it. Price, therefore, serves as a planning tool to making the economic decision as to where the economy is to be taken (The fundamentals of market economy self-regulation).Price also stimulates firms and industries into production process due to high profit guaranteed when a firm is involved in large scale production. Lastly, price help in the distribution of income and resources to the most efficient industries in the market.