We have to deal with prices pretty much every day. But what is a price? Ultimately, it’s a signal. Lots of things may affect prices but one way of conceiving it is as a signal about the relative strength of demand compared to supply. Demand includes factors like preferences and incomes, while supply includes factors like costs and technology. When prices are falling, either demand has weakened or supply has strengthened – or indeed some combination of the two. Seen this way, prices are like a thermometer, a gauge of the current temperature in the market. When prices are high…

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