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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.

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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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In a market-based economy, prices function as an incentive because they represent potential for profit.

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To consumers, price signals the opportunity cost of a purchase. Prices tell producers what consumers want.

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Price allows Markets to respond to changing conditions

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Price allows Markets to respond to changing conditions

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Prices allocate Scarce Resources Efficiently.

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Prices allocate Scarce Resources Efficiently.

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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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Prices Convey Information to Consumers and Producers.

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Prices Convey Information to Consumers and Producers.