The role of prices in public calamities: flexibility as a solution to shortages

Prices play a fundamental role in signaling essential economic information and are recognized as the best signaling mechanism available in markets. In the most competitive markets, the function of prices goes beyond simply balancing supply and demand. They also ensure the highest possible efficiency. In this context, agents who can produce at a lower cost are the ones who sell, while those who value or need the product the most are the ones who buy.