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Market Price convey information Prices play a key role in the market economy. The central problem of economic is to allocate scarce resources efficiently. Prices as a vehicle convey sufficient information to all traders in the market for their economic activities and ensure that goods will be allocated efficiently. There are a lot of transactions between buyers and sellers in the market, individuals pursuing their own self-interest and aim to maximize utility; companies provide goods and services by the aim to make profits, each seeking their own interest. Price mechanism coordinate these transactions and in such a way to make everyone better-off. Market price serves as an "invisible hand" guiding resources to their most efficient uses. First, for the further argumentation, I will explain how prices convey information, namely how price mechanism works. Suppose that, in a small town, for some reason there is an increased demand for potatoes. Retail stores will...

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