1. The passage I found to be most interesting was the very first paragraph in which McMillan describes the bazaars. The reason I found this the most interesting is because I can relate to everything that is said. When I was younger I had went to India for vacation and had gone through a bazaar type setting with my parents. There were many stands set up by the locals, and the only advertising they did for their product was yell out a particular product they had for sale or set out all the goods for passer byers to come across. There were no price listings, even for less valuable goods. I believe this was because even though some goods were very inexpensive, the vender would have a feel for if they could get more money then it was actually worth bassed on the bargaining of the buyer. It works the other way as well, if a vender was eager to get rid of a item the buyer can bargin the price down in their favor.
2.Transaction cost is the total cost of everything put into the transaction, from the price of the item, time put into obtaining the good for the vender, as well as the price the item is sold at. An example would be a homemade good. The cost of putting in the time to create the good, the time spent selling the good, and the amount the good is sold for is all put into the transaction cost of the venders homemade good.
3. Imperfect information can lead to overpricing because the consumer could lack the knowledge of being able to find the product at a cheaper price for the quantity, and the consumer might want to lower their time spent on shopping around for a good to decrease their transaction cost. The vender can also be hurt by this price because they might not know what price is to high or low in order to optimize their selling potential.
No comments:
Post a Comment