economy

Why is it important that prices are flexible in our economy? Do you think the government should control the level of prices for products that are really important, ie. gasoline?

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The Importance of Price Flexibility

It is important for prices to be flexible to stabilize an economy. The objective of sellers is to maximize profits whereas buyers want to obtain value for their money by acquiring commodities that maximize their utility. Thus, price flexibility allows buyers and sellers as it enables the market forces of demand and supply to control the price indices in an economy. For instance, the flexibility facilitates an increase in prices of scarce commodities to encourage additional production.

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