One of the things that prices do is carry information to buyers and sellers. Encourage Efficient Production . Prices encourage business people to produce their goods at the lowest possible cost. The less it costs to produce an item, the more likely it is that its producers will earn a profit. Firms that are efficient will produce more goods with fewer raw materials than firms that are inefficient.
Producers strive for efficiency as a way of increasing their profits.
While these efforts are in the best interests of the sellers, all of us may benefit because we are provided with the things we want at lower costs. Determine Who Will Receive the Things Produced . Finally, prices help to determine who will receive the economy's output of goods and services. The price that a worker receives for doing a job is called a wage. The amount of this wage determines how much the worker has to spend.