price theory

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A theory that, at the microeconomic level, defines the role of prices in consumer demand and the supply of goods by firms. At a broader level, it explains the role of prices in markets as a whole. At the macroeconomic level it treats wages and interest rates as the prices of particular goods, thus implying that governments must take market forces into account when formulating such policies as incomes policy and monetary policy.

Subjects: Business and Management.

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