Answer to Question #227518 in Economics for lynn

Question

in market economy what do low prices indicate

Answer 1

Price is a monetary expression of the value of labor that was expended in the production of a good or service.

Market prices are set not only on the basis of the cost of materials and labor. The price is formed under the influence of supply and demand, as mentioned earlier.

If the seller increases the price, then this reduces the demand of potential buyers. If a product becomes scarce (demand is greater than supply), then the price rises accordingly. If the market is overflowing with a certain product, and there are not so many buyers for it, then the price will have to fall. In some cases, price becomes a regulator of supply and demand.

But that's just one look at pricing. There are other theories based on other pricing factors.