Why is it important that prices are flexible in our economy?

Why is it important that prices are flexible in our economy?


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Most Helpful Guy

  • Well, i would say its important simply because it helps control the natural process of supply and demand, and it ensures a country with free markets always has the goods that its people both want and need at a price that fairly reflects its value. A good that is high in demand by a country's people will have its price bid upwards in the free market to a point which will convince entrepreneurs and producers to make more of that good for people for a profit. When there is too much of a product that people don't need, the opposite will happen where its price will drop, which will convince producers not to make any more of that product because consumers already have enough of it. When prices of certain goods are fixed, it can cause artificial shortages brought about by people being able to buy a particular product at at price that is lower than it should be, coupled with the fact that producers won't work to produce a good that isn't priced fairly.

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What Guys Said 1

  • Because they take account of changes in supply and demand.

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What Girls Said 1

  • At least be honest and tell people you're asking for homework help. Crash Course is doing a series on Economics. Maybe you should think about subscribing www.youtube.com/watch

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