CA Foundation Exam > CA Foundation Questions > Price-mechanism is an important feature of &n...
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Price-mechanism is an important feature of –
(i) Market economy
(ii) Regulated economy
(iii) Mixed economy
(iv) Capitalist economy
(i) Market economy
(ii) Regulated economy
(iii) Mixed economy
(iv) Capitalist economy
- a)i and ii only
- b)iii and iv only
- c)i and iv only
- d)i and iii only
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
Price-mechanism is an important feature of –(i) Market economy(i...
- Price-mechanism is an important feature of the market economy and mixed economy.
- In a market economy, prices are determined by the free interaction of the forces of demand and supply without government intervention.
- Similarly, in a mixed economy, even though there is government intervention in some sectors, the price mechanism still plays a significant role in determining prices in many parts of the economy.
Most Upvoted Answer
Price-mechanism is an important feature of –(i) Market economy(i...
Understanding Price Mechanism
The price mechanism is a fundamental concept in economics, particularly in market-oriented systems. It refers to the way prices are determined through supply and demand dynamics, influencing resource allocation.
Market Economy
- In a market economy, prices are set based on consumer preferences and resource availability.
- The forces of supply and demand interact freely, allowing prices to fluctuate.
- This mechanism efficiently allocates resources without central planning.
Capitalist Economy
- A capitalist economy is characterized by private ownership and profit-driven enterprises.
- The price mechanism plays a crucial role in guiding businesses on what to produce based on consumer demand.
- It facilitates competition, leading to innovation and improved goods and services.
Regulated Economy
- In a regulated economy, government intervention limits the price mechanism.
- Price controls may be implemented to stabilize the economy or protect consumers.
- Therefore, the price mechanism is not a defining feature in such economies.
Mixed Economy
- A mixed economy combines elements of both market and regulated economies.
- While the price mechanism operates in many sectors, government intervention in key areas can distort price signals.
- Thus, the price mechanism is present but not as dominant as in purely market or capitalist economies.
Conclusion
Given this understanding, the correct answer is option 'D' - the price mechanism is a critical feature of both market economies and capitalist economies, as they primarily rely on free market forces for pricing. In contrast, regulated and mixed economies incorporate elements of government control, which can disrupt the price mechanism's efficacy.
The price mechanism is a fundamental concept in economics, particularly in market-oriented systems. It refers to the way prices are determined through supply and demand dynamics, influencing resource allocation.
Market Economy
- In a market economy, prices are set based on consumer preferences and resource availability.
- The forces of supply and demand interact freely, allowing prices to fluctuate.
- This mechanism efficiently allocates resources without central planning.
Capitalist Economy
- A capitalist economy is characterized by private ownership and profit-driven enterprises.
- The price mechanism plays a crucial role in guiding businesses on what to produce based on consumer demand.
- It facilitates competition, leading to innovation and improved goods and services.
Regulated Economy
- In a regulated economy, government intervention limits the price mechanism.
- Price controls may be implemented to stabilize the economy or protect consumers.
- Therefore, the price mechanism is not a defining feature in such economies.
Mixed Economy
- A mixed economy combines elements of both market and regulated economies.
- While the price mechanism operates in many sectors, government intervention in key areas can distort price signals.
- Thus, the price mechanism is present but not as dominant as in purely market or capitalist economies.
Conclusion
Given this understanding, the correct answer is option 'D' - the price mechanism is a critical feature of both market economies and capitalist economies, as they primarily rely on free market forces for pricing. In contrast, regulated and mixed economies incorporate elements of government control, which can disrupt the price mechanism's efficacy.
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Price-mechanism is an important feature of –(i) Market economy(ii) Regulated economy(iii) Mixed economy(iv) Capitalist economya)i and ii onlyb)iii and iv onlyc)i and iv onlyd)i and iii onlyCorrect answer is option 'D'. Can you explain this answer?
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