The Three Functions of Prices in a Market Economy

The video tutorial explains the three main functions of prices in a market economy: rationing, signaling, and incentive. Prices help allocate limited resources, signal market conditions, and provide incentives for economic agents. The tutorial uses graphical representations and examples to illustrate these concepts, emphasizing the role of prices in achieving market equilibrium.

How do consumers' perceptions of value affect their purchasing decisions?

In what way do prices help to allocate limited resources effectively?

What is the significance of the equilibrium price in a market?

How do changes in prices indicate market equilibrium or disequilibrium?