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A primary role of price is to convey information. Both consumers and producers use this information to help make decisions. It may be an overstatement to call prices a “language,” but prices do send a signal. The high price of Manhattan real estate, for example, signals that this particular good is in short supply. The low price of rubber flip-flops sends the opposite signal.

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Producers also use prices to appeal to the consumers they hope will buy their products.

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When home prices increase, for example, the change signals construction firms, architects, builders, and tradespeople that there are profits to be made in the housing market.

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Just as changing prices motivate producers, prices in the form of wages and salaries motivate workers. The opportunity to earn a higher “price” can inspire people to enter the workforce or seek higher-paying jobs. On the other hand, low wages can act as disincentives for people to seek work.

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Prices allow markets to adjust quickly when major events such as wars and natural disasters interfere with the production or movement of goods, wreaking havoc on supply.

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This new, low equilibrium price reflected the fact that in addition to the increase in supply as U.S. facilities went back on line, refiners throughout the world had rushed fuel to the United States in the months after the hurricanes. As the supply of gasoline increased, prices at the pump went down.

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The firms whose dairy products are in greatest demand will buy the most milk in order to make products to meet that demand.

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These production decisions are, at bottom, decisions about how best to use limited resources.