Time as a tool from Luxury to Need: Rationing function of Price Mechanism
Price Mechanism in simple terms means the determination of the
price of a commodity or a service based on the determinants of supply and
demand.
In general we observe that the price of a commodity or a service tends to rise when
there is high demand for it and vice versa
.
But with change in time ,the needs of the people have
changed. There was a saying that there are only three basic needs of a man Food
, Shelter and clothing. But this doesn’t seems to be the scenario now.
People need Gadgets, they need a Car, they need a Smartphone
and the list goes on. With this increase in demand there needs to increase in
supply and to meet the supply we need resources. Here comes the crucial part
which is inevitable “Time”. Most of the resources need time to grow or to
regenerate. And here comes the need of rationing commodities.
So whenever the resources are in scarcity, demand exceeds supply and the prices go up. The motive of the price rise was to control the demand and
conserve resources.
With this I can sum up that the Rationing function of the Price Mechanism is one of the crucial factors to maintain the Supply and Demand
Equilibrium.
Refered Wbesite: www.economicsonline.co.uk
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