The topic under discussion is on “Newsom calls for investigation into California’s high gas prices” by Sophia Kunthara (2019). The primary microeconomic topic discussed in the article regards to price. Price is a microeconomic concept that refers to the amount charged on a commodity. The term can also be used to refer to a measure of value. Price of products and services is one of the most important economic concepts as it to a greater extent determine the demand and supply of goods in an economy. The supply of any good or service will match the demand provided that the price is allowed to move freely or not artificially controlled. For example, whenever the supply of given commodities in the economy are in excess, the government would seek to reduce the production of the products and lower the prices. As a result of the reduction in the prices, the demand will considerably increase, and as time goes by, the prices start adjusting (rising) and so the demand will begin falling. Notably, this will happen until a balance between supply and demand get achieved.
From the above illustration, it is apparent that the price can be said to have three essential functions. First, price determines the goods to be produced and in what quantities. When a commodity is in excess, the price will be used to limit the amount of production. Secondly, it determines the method of manufacturing a firm uses in the production of their goods. In this regard, whenever a company wants to produce a commodity, they usually analyze the cost/price of production techniques and so pick the most profitable one. Finally, price determines who gets and who does not get a given commodity in society. It does this by making the product affordable to a group of individuals while making it quite expensive to others.