Role Of Price Machanism

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Role Of Price Mechanism

While we cannot ignore the various criticisms leveled against the price systell ami some of them arc reasonably valid, we have to concede that the Sanctioning of the price system is conducive to economic efficiency. i.c.. efficient allocation of community ‘s product ivc rest sources. On the whole, it may be said that working of the capitalistic system is nut of the question without price mechanism. It is price-mechanism which brings about the necessary adjustments between the various parts of the economic system, It is really difficult to think ow the economic system could functions justly or smoothly. But price-mechanism certainly enables it to work normally without any serious jolts and jerks, The price s inequalities, It enables the hll,!.landlords allli industrial  magnates to acquire vast property which they call health to their successors.  owing to differences ill the quail) and  of human  supplied hy the households, there  galling differences ill income  cannot, however, rely entirely on the tree  play of market forces, The prevailing price-relationsin an under-developed  arc oltcn tile result of market imperfections and rigidities. Nor can the changes in relative prices by themselves always bring about the necessary re-allocation of resources quickly or adequately. In a developing economy, the basic trend of government operations in the fiscal and monetary fields is inevitably expansionary. Hence economic policy in a planned economy must influence the allocation of resources tln ough direct controls, allocations, taxation and suhsidic».  that it conforms more closely to the objectives of planning. Thus, thc govcnuncut
has to play a positive role in usin g thc pricc-mechanismfor purposes of planning.
There is no  economic policy which docs nut. in some way or another, have a hearing on prices, Therefore, we should nut view price policy in isolation: It mU~1 be viewed as an integral part of general economic policy. We may conclude that within a broad framework of a properly conceived plan, the cvolution and implementation of an appropriate price policy can he of a~si tam’e in sccuring the plan objectives.

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Role Of Price Machanism