In which of these instances does price function as a signal in the market?
A) Suppliers invest more in exploration when the price of oil increases.
B) Consumers complain of price gouging as the price of oil skyrockets.
C) Government imposes price controls on the skyrocketing price of oil.
D) Consumers increase buying when the price of oil increases.

Question

Quizplus · Accepted Answer

Price functions as a signal in the market when it influences the behavior of suppliers and consumers. In option A, the increase in oil prices signals suppliers to invest more in exploration, indicating that prices are guiding economic decisions.

In Which of These Instances Does Price Function as a Signal