Final answer:
Prices serve as a signal for both consumers and producers in determining their purchase and supply decisions.
Step-by-step explanation:
Price refers to the monetary value assigned to a product, service, or resource in a transaction. It represents the amount a buyer is willing to pay and a seller is willing to accept, reflecting the perceived value of the offering in the market. Prices serve as a signal to both consumers and producers.
For consumers, prices help them determine if they can afford and are willing to purchase a particular good or service. High prices may discourage consumers from buying, while low prices may encourage more purchases. On the other hand, producers use prices to decide what to produce, how to produce, and for whom to produce. When prices are high, producers are motivated to bring more to the market, and when prices are low, they may reduce their supply.