What is the role and significance of prices in a market economy?

Question

Summer reading question from the book "Naked Economics"

Any answers with evidence in that book would be GREATLY appreciated

Answer 1

Not sure about the book.... but prices act as a language between buyers and sellers

Answer 2

Prices are light traffic signals in an economy. They self-regulate the economy and are critical to a market. That is why socialism and its attempts to set prices cannot function properly because it never allows for the true price to be discovered.