The Price Mechanism

Grade 11•45 minutes•IB Economics Assessment Objective AO1.1 (Demonstrate knowledge and understanding of specified content) and AO2.1 (Apply economic concepts and theories to real-world situations.

Learning Objective

I can demonstrate my understanding of the price mechanism by explaining how changes in supply or demand affect equilibrium price and quantity, and relate this to real-world examples.

Practice Questions

This lesson includes 7 practice questions to reinforce learning.

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1. Define the term "equilibrium" in the context of supply and demand, and explain how it is represented on a supply and demand diagram.

2. Explain how an increase in demand affects the equilibrium price and quantity of a good or service. Use the concepts of excess demand and the signaling function of prices in your explanation.

3. Describe how a surplus in the market for a product leads to a change in price and quantity. Explain the role of the incentive function in this process.

...and 4 more questions

Educational Video

Y1 7) Price Mechanism - The 4 Functions (Signalling, Incentivising, Rationing & Allocating)

EconplusDal

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