What are the Limitation of Price Mechanism?

The Major Limitations of the Price Mechanism are as follows :

The price mechanism is unable to cope with the supply of those goods or services where the benefit is diffuse or indiscriminate. These are goods such as defense or the services of the police force. These cannot be supplied by the market.

It is wrong to say that the price’ system leads to the production of goods which the consumers prefers the most. Rather, the consumer are hypnotized through high pressure salesmanship to buy goods which the producers think most profitable to The consumer’s sovereignty is myth.

The price system accent rates economic inequalities.

The effectiveness of the price mechanism is reduced by the existence of various imperfection in the market.

The price System has proved to be an imperfect mechanism for achieving full

The price system does not help the economy of the country or adjust quickly to drentic charges is community’s production targets.

The critics also point out that the price system fails to register all costs and benefits. It shows only the cost of the producers, but not the social-courts (i.e., harm which a system of production may do to the society,,e.g. air and water pollution).

Similarly, it only register -utility of purchase to the individual consumer but takes no notice of the benefits to the society.

The various limitation of the price mechanism call for some sort of government regulation and control over the working of the system.

Tags: Ba Economics

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