Explain why price mechanisms may be interfered with
- Ignorance of customers. When consumers are ignorant about the goods and services they need to be protected from misleading advertisement.
- Consumers may need to be protected from exploitation of monopolists.
- Income inequality. If production is left to market price mechanism the poor may not receive basic goods and services
- Future needs. Price mechanisms fail to project the future need which call for government planning
- Profits can at time be a bad guide. Profits from charcoal can lead to over exploitation of forests.
- Stability of prices. Price mechanisms may lead to excessive price fluctuations
- Mismatch with structural changes. When there is a need for immediate structural transformation within economy, price mechanisms may be inadequate since they fail to allocate resources to immediate required venture e.g. during the period of war.
- Under price mechanism, inefficient firms are forced out of production leading to unemployment.
- to control inflation that may result from price mechanisms
CATEGORIES Economics
TAGS Dr. Bbosa Science
