Advantages and Disadvantages of the Price Mechanism

• Advantages of the Price Mechanism:

  • efficient allocation of resources
  • Consumers have the power to influence what firms produce
• Advantages of the Price Mechanism:


  • efficient allocation of resources
  • Consumers have the power to influence what firms produce
• Disadvantages of Price Mechanism:

  • Under provision of public goods causes market failure
  • Asymmetric information and monopoly power can lead to consumers being exploited by firms
• Disadvantages of Price Mechanism:


  • Under provision of public goods causes market failure
  • Asymmetric information and monopoly power can lead to consumers being exploited by firms