The Price Mechanism

“Suppose there is an increase in consumer income, leading to a rise in demand for organic produce. Explain how this shift in demand affects the equilibrium price and quantity of organic produce, referencing the signaling, incentive, and rationing functions of the price mechanism. Imagine a new technology significantly lowers the cost of producing smartphones. Explain how this shift in supply affects the equilibrium price and quantity of smartphones, referencing the signaling, incentive, and rationing functions of the price mechanism. Consider a situation where a natural disaster destroys a large portion of the coffee bean crop. Explain how this shift in supply affects the equilibrium price and quantity of coffee, referencing the signaling, incentive, and rationing functions of the price mechanism.”