Sometimes the response to price signals,rather than the signals themselves,may be flawed.

Question

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Price signals can be influenced by various factors such as market conditions, consumer behavior, and government regulations. As a result, the response to price signals may not always be rational, leading to flawed decisions. For example, consumers may continue to purchase a product even if its price is high due to brand loyalty or lack of alternatives, ignoring the price signal indicating that the product is overpriced. Similarly, businesses may cut down on production even when demand is high because of concerns over short-term profitability, disregarding the price signal indicating that there is a potential for growth.

Sometimes the Response to Price Signals,rather Than the Signals Themselves,may