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Prices Allocate Scarce Resources Efficiently

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Prices Allocate Scarce Resources Efficiently

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~Perhaps the most important role of price in a market-based economy is to guide resources to their most efficient uses ((Econ Alive The Power to Choose, Section 6.5).
~The firms whose dairy products are in greatest demand will buy the most milk in order to make products to meet that demand. Guided by prices that communicate what consumers want, dairy producers automatically allocate milk—a scarce resource used to make many different products—to its most valued use (Econ Alive The Power to Choose, Section 6.5).

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Prices Allow Markets to Respond to Changing Conditions

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Prices Allow Markets to Respond to Changing Conditions

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~Prices allow markets to adjust quickly when major events such as wars and natural disasters interfere with the production of goods, wreaking havoc on supply (Econ Alive The Power to Choose, Section 6.5).
~When hurricane Rita hit, the nation was able to help out all of the people (Econ Alive The Power to Choose, Section 6.5).

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Prices Create Incentives to Work and Produce

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Prices Create Incentives to Work and Produce

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~Rising Prices in a market motivate existing firms to produce more, and they encourage new forms to enter a market ((Econ Alive The Power to Choose, Section 6.5).
~Falling Prices, serve as incentives for firms to cut back on production or even to leave a market to look for better opportunites elsewhere (Econ Alive The Power to Choose, Section 6.5).

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Prices Convey Information to Consumers and Producers 

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Prices Convey Information to Consumers and Producers 

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~It may be an overstatement to call prices a "language," but prices do send a signal (Econ Alive The Power to Choose, Section 6.5).
~Prices tell producers what comsumers want (Econ Alive The Power to Choose, Section 6.5)