ABSTRACT
In Chapter 2 we emphasised that a central tenet of almost any modern economic system is a strong belief in the market mechanism (see Key Points 2.1 and 2.3). We also began to recognise that the forces of supply and demand are closely associated with this mechanism. This was highlighted in Figure 2.2. To interpret market signals perceptively – whether in the construction industry, building materials sector, property market or whatever – it is necessary to consider the price mechanism in more detail. We now begin to elaborate our understanding of the price mechanism. We can define it more fully as:
an economic system in which relative prices are constantly changing to reflect changes in supply and demand for different goods and services.
