Question

Compared to quantity measures, price is always the preferred policy tool because it can achieve the targeted production level in a cost efficient way." Do you agree with this statement? Explain.

Answer 1

Yes it is a true statement that price is always the preferred policy tool when we delete it to the achievement of the targeted production level in a cost efficient way and with the quantity measures.

I completely agree with this statement because everything is related to the cost and for cost it is essential to know the pricing policies and the price of the various factors of production.

Here are various factors of production are land labour capital and entrepreneurship everything is estimated on the basis of its price.

There is an inverse relationship between the production and the price of the factors if the price of the factors are less than production level will go up and if the price of the factors of production is high then the production will go down.

It is a simple phenomena that a producer and a seller is working on the principle of what they are getting and how much they will cover the cost and receive as a revenue. A producer has limited resources means Limited amount to invest if the factors of production is high then it is not possible for a producer to purchase or to invest more in the factors and this is the only reason why the Purchase less and ultimately the production will go down.

So in conclusion it is true that the pricing policy or price is always the preferred policy tool in the targeted production level in a cost efficient way.