Price System

Price System refers to an economic system where prices are decided by exchange of demand and supply and the prices resulting from it is taken as a signal which is communicated between consumers and producers and which helps in guiding production and distribution of the resources. It does this primarily by coordinating the decisions of consumers, producers, and owners of productive resources. It may be either a fixed price system where prices are administered by a government body, or it may be a free price system where prices are left to float “freely” as determined by supply and demand uninhibited by regulations.