Lesson 1.2.7
1.2.7 The price mechanism Quiz: Pearson Edexcel Economics, Unit 1
20 questions
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Lesson 1.2.7, The price mechanism: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 1: Theme 1: Introduction to markets and market failure, written with Revision Ninja.
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The 20 questions
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Which function of the price mechanism allocates scarce goods among buyers?
- Rationing function
- Incentive function
- Signalling function
- Allocative efficiency
-
Which price mechanism function encourages firms to increase output when prices rise?
- Distribution function
- Incentive function
- Signalling function
- Rationing function
-
What does a price increase signal to consumers about a good?
- Relative abundance
- Relative scarcity
- Government intervention
- Higher quality
-
Which market type allows the price mechanism to operate across international borders?
- Local market
- Global market
- National market
- Regional market
-
Why are price signals often less effective in a local market than in a global market?
- Perfect information
- Greater product mobility
- Higher indirect taxes
- Fewer market participants
-
When a labour shortage causes wages to rise, which price mechanism function attracts new workers?
- Taxing function
- Incentive function
- Rationing function
- Regulatory function
-
Which term describes resource allocation guided entirely by the price mechanism without central planning?
- Command economy
- Mixed economy
- Market economy
- Traditional economy
-
What does a rising price primarily signal to producers about a product?
- Excess supply
- Increasing scarcity
- Falling production costs
- Decreasing demand
-
How does the price mechanism immediately respond to a sudden shortage of a good?
- Supply increases
- Demand increases
- Prices increase
- Prices decrease
-
The price mechanism allocates goods according to consumers' willingness and what other factor?
- Legal entitlement
- Social need
- Equal share
- Ability to pay
-
A price ceiling set below equilibrium prevents the price mechanism from fulfilling which function?
- Stabilising function
- Taxing function
- Rationing function
- Equalising function
-
Which function of the price mechanism limits consumer demand when prices rise?
- Incentive function
- Allocative function
- Rationing function
- Signalling function
-
How does a price drop act as an incentive for consumers?
- Discourages consumption
- Encourages higher purchases
- Increases market price
- Reduces consumer surplus
-
What signal does falling profit give to existing firms in a market?
- Lower market prices
- Raise market demand
- Reallocate resources elsewhere
- Increase output rapidly
-
How does the price mechanism ration concert tickets when demand exceeds supply?
- Allocating by price
- Random lotteries
- First-come queueing
- Government rationing
-
In a global market, what does a sudden price rise for raw coffee beans signal?
- Lower profit margins
- Global supply tightness
- Falling production costs
- Excess world supply
-
Why does the price mechanism work most efficiently in competitive markets?
- Fixed market prices
- Guaranteed equal profits
- Zero consumer demand
- Accurate price signals
-
When rising housing demand increases prices, what incentive is created for builders?
- Reduce housing supply
- Exit the market
- Increase housing supply
- Lower rental prices
-
Which factor slows down the price mechanism's response to changes in market demand?
- Perfect information
- Elastic demand
- Competitive markets
- Inflexible supply
-
Which function of the price mechanism encourages producers to expand output when prices rise?
- Incentive function
- Signalling function
- Allocative function
- Rationing function
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