The Economy Around You — What rising and falling prices are really telling you.
Prices are signals. A rising price often means strong demand or limited supply, while a falling price can mean weak demand or excess supply.
Prices coordinate millions of decisions without anyone in charge: high prices attract more production and discourage use, all automatically.
Surge pricing and seasonal discounts are price signals in action, rationing scarce goods and clearing surpluses.
Holding a price below its market level tends to cause shortages, since more is wanted than is supplied at that low price.
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