What is the role of price in the economy?

What is the role of price in the economy?

Price serves as a signal to both consumers and producers, helping to allocate resources efficiently.

Can you explain how prices affect supply and demand?

Certainly! When prices rise, demand typically decreases while supply increases, and vice versa.

What happens when prices are set too high or too low?

If prices are too high, it can lead to surplus; if too low, it can cause shortages in the market.

How do prices influence consumer behavior?

Prices affect consumer choices by determining what goods are affordable, influencing purchasing decisions.

Are there any exceptions to these price rules?

Yes, exceptions can occur due to factors like price controls, monopolies, or external economic shocks.