A price signal
conveyed to consumers
, via the price charged for a product or service
, which provides a signal to increase or decrease quantity supplied or quantity demanded. It also provides potential business opportunities
. When a certain kind of product is in shortage supply and the price rises, people will pay more attention to and produce this kind of product The information carried by prices is an essential function in the fundamental coordination of an economic system, coordinating things such as what has to be produced, how to produce it and what resources to use in its production.
a simple graphica, which is the price signal from the market
Alternative theories include that prices reflect relative pricing power
of producers and consumers. A monopoly
may set prices so as to maximize monopoly profit
, while a cartel
may engage in price fixing
. Conversely, on the consumer side, a monopsony
may negotiate or demand prices that do not reflect the cost of production. The pricing power
owned by an enterprise reflects the position of its products in the market. In this case, the price signal may no longer be able to affect such products.
A long thread in economics (from Aristotle to classical economics to the present) distinguishes between exchange value, use value, price, and (sometimes) intrinsic value. It is frequently argued that the connection between price and other types of value is not as direct as suggested in the theory of price signals, other considerations playing a part.
Firms use price discrimination
to increase profits by charging different prices to different consumers or groups of consumers. Price discrimination may be regarded as an unfair practice used to drive out competitors.
- ^ Boudreaux, Donald J. "Information and Prices". The Concise Encyclopedia of Economics. Library of Economics and Liberty (econlib.org). Retrieved 18 June 2017.
- ^ Hayek, Friedrich (1945). "The use of knowledge in society". American Economic Review. XXXV (4): 519–530. JSTOR 1809376.
- ^ Commission, Australian Competition and Consumer (2013-01-09). "Cartels". Australian Competition and Consumer Commission. Retrieved 2021-04-25.
- ^ Schroeder, Mark (2016), Zalta, Edward N. (ed.), "Value Theory", The Stanford Encyclopedia of Philosophy (Fall 2016 ed.), Metaphysics Research Lab, Stanford University, retrieved 2020-11-09
- ^ Gopinath, Gita (April 14, 2020). "The Great Lockdown: Worst Economic Downturn Since the Great Depression". International Monetary Fund.
- ^ Dequech, David (2012). "Post Keynesianism, Heterodoxy and Mainstream Economics". Review of Political Economy. 24 (2): 353–368. doi:10.1080/09538259.2012.664364. ISSN 0953-8259.
- ^ Lavoie, Marc (2006), "Post-Keynesian Heterodoxy", Introduction to Post-Keynesian Economics, Palgrave Macmillan UK, pp. 1–24, doi:10.1057/9780230626300_1, ISBN 9781349283378
- ^ Jonathan Nitzan and Shimshon Bichler, Capital as Power: A Study of Order and Creorder, Routledge, 2009, p. 228.
^ Thomsett, Michael C (2019). Practical Trend Analysis
. Bibliographic information published by the Deutsche Nationalbibliothek: Walter de Gruyter Inc., Boston/Berlin. ISBN [[Special:BookSources/ISBN 978-1-5474-1721-6 e-ISBN (PDF) 978-1-5474-0108-6 e-ISBN (EPUB) 978-1-5474-0110-9|
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