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he mixed economy are much more stable if compare to free market economy, and the government regulations can also prevent the exorbitant investment and inflation. Beside our country Malaysia, the economic systems in India, Thailand, Indonesia, and Singapore are also belongs to mixed economy.

What is the price mechanism? The price mechanism is the most basic feature of the economy for allots all the resources to other uses. It is a system of the interdependence between the supply of goods or service and its price. It sends up the price when the demand is over supply and it decrease the price when the supply over demand. Price mechanism also restricts the supply when the suppliers are leave the market because the low prevailing price, it also increase it when many suppliers come to the market. Price are determine by surpluses and shortage. If the price of product is higher than profit, the suppliers will supply more due to producer profit motive. The price mechanism are plays the three important function, they are signaling function, rationing function and transmission of preferences. First, the signaling function is use the change in demand to show that where the resources are required. For an example, if the goods are scarce, the price of it will increase. This increase in price can provide the supplier to produce more in this product. Prices rise and fall is reflect the surplus or scarcities.

Consider to the left hand diagram on top. Now, the I phone 4 is the best-selling on this year, so the demand of the I phone 4 is very high. The producers confirm will produce more and increase the price of I phone 4 because they can earn higher profits and revenues from selling the I phone 4 at a higher price per unit. So the diagram shows an outward shift of the demand in the supply curve. Next, the diagram at the top of right hand side is the second example, the demand of the I phone 3 are decrease because the apple launch the I phone 4. The diagram show that decrease the price of I phone will cause the supply increase. Conversely, if the price of I phone 3 increase, that will induce the suppliers decrease their supply. Next, the second function that the price mechanism play is rationing function, this function is when there is a very high demand of one goods, the price of it will increase. Finally, the product maybe will become only the high income people ability to pay the product. This function can cause the supply and demand to reach equilibrium. The third function is the transmission of preferences, this refers to the consumers are able to notice the producer changes in needs and wants, so this can help the market provides correct amount of the right product. After that, In Malaysia, the price mechanism is allowed to operate but in some cases the price mechanism fails or works against public interest. In economic, the market failure occur when the use of goods and services or the production by the market are not efficient. We say that when markets cannot provide us the best outcome in terms of efficiency and fairness, that is market failure. There are a lot of reasons that will cause the market failure, such as negative externalities, positive externalities, imperfect information, market dominance by monopolies, factor immobility and equity issues. First reason is an agent in the market can gain market power and allow them to block other mutually benefic gain from the trade. In the monopoly, equilibrium of the m