Economics - functions of price

they're the 3 functions of price.

rationing means that's how goods are spread out/distributed between people (by people's ability to afford them)

signalling, i think, is where, say if a firm is making supernatural profits, it acts as a signal to others to enter into the market and compete the profits down (that's why under perfect competition supernatural profits only occur in the short-run)

and incentive is obvious... it's people's reason for doing stuff, e.g. you work for a price, not out of the kindness of your heart (ignoring charity workers or whatever)

they're the 3 functions of price.

rationing means that's how goods are spread out/distributed between people (by people's ability to afford them)

signalling, i think, is where, say if a firm is making supernatural profits, it acts as a signal to others to enter into the market and compete the profits down (that's why under perfect competition supernatural profits only occur in the short-run)

and incentive is obvious... it's people's reason for doing stuff, e.g. you work for a price, not out of the kindness of your heart (ignoring charity workers or whatever)

Incentive function is as price rises firms increase production/new firms enter the market to capitalise on the high prices (which then of course creates excess supply thus lowering the price again, Smiths 'invisible hand' init). This is why the supply curve slopes upward.