Price Signal

A price signal is an indicator in the marketplace that reflects the supply and demand for a product or service. When prices rise, it often means demand is high or supply is low, encouraging producers to make more of that product. Conversely, when prices fall, it typically indicates that supply exceeds demand, prompting producers to reduce output. Price signals help consumers and businesses make informed decisions about what to buy, sell, or produce, ultimately guiding resources to where they are most needed in the economy.