Which of the following correctly illustrates how prices serve as signals to consumers?

Question

A high price signals to consumers that the good is well-made.

A low price signals to consumers that they should buy a good.

A high price signals to consumers that they should buy a good.

A low price signals to consumers that the good is not well-made.

Answer 1

The correct option that illustrates how prices serve as signals to consumers is:

A low price signals to consumers that the good is not well-made.

This statement reflects the idea that lower prices may imply lower quality or less desirable goods, while higher prices can signal better quality or higher demand.