Importance of Price as a Signal

Changes in price indicates changes in demand and supply.
This is how it works:
Demand for shares fall, this is indicated by the inward shift of the demand curve from D1 to D2 towards the left.

Prices fall to indicate demand fell. Which as shown in the diagram is from Price level P1 to P2.

Revenue and Profits falls, these are indicators to producers who realise that their products' demand has fallen from Q1 to Q2. Factors of production are made redundant and resources are allocated to other more profitable products.

The change in price indicates to producers the level of demand in any economy in any certain time period. It acts as a link between consumers and scarce resources and this in turn influences the choice that producers make when deciding what goods and services they are willing to supply, and where resources are best allocated to.