Rizzo started class by stating that transaction costs are anything that prevents beneficial exchanges from taking place. The middle man skims a little off of both sides, they benefit both sides. They have a comparative advantage in lowering transaction costs between buyers and sellers. They bring buyers and sellers together. Wegmans is a perfect middle man. The reduce the transaction cost of farmers and manufacturers and bring it to consumers. Wegmans charges $1.69 for a pound of apples. The farm sells them for $0.30 a pound at the farm. We are paying extra for the convenience of having the apple at that place at that time. Reducing transaction costs make the product overall cheaper. The price increase for shopping at Wegmans is a return. It reduces the search costs.
MOST PEOPLE WHO GET RICH FIND A WAY TO LOWER TRANSACTION COSTS.
The middle man is aloud because we live in a economy where we can exchange property rights.
Demand- know that people must specialize. Exchange can occur in small groups. The difference in a world of 7 billion people compared to a world of 200 people is that we have to overcome information problems (don’t know what people want) Other problem is transaction cost problem (overcome barrier of non trust in people and getting products from NY to someone in China). We all have bits of knowledge that are useful in the right time and place.
A price is information. (traffic cops) signals to buyers and sellers about what is scarce. Signals of whether to buy the product or not. It shows how much people value things. It makes order. They come from a market setting. All prices come from markets. We had markets before we had money. (used in ancient Egypt. Would trade horse for other material.) Markets are a process. Prices determined in a market process. Markets are any group of POTENTIAL buyers and sellers. Farmers market is a market, virtual markets exist as well. (ebay, Amazon). There are also prediction markets in trade. Any decentralized organized interaction between buyers and sellers constitutes a market. When you have a market, 1 of 2 things emerge. You either get the deduction of many prices or non money prices. The goal of a market is to produce order. Order means that things work. Apples on the shelves. Class is taught today. Order is constantly occurring. Buyers and sellers interact and sometimes, only a money price is needed to produce order. At pizza place, prices are high enough to prevent lines from being out the door, but low enough that dough isn’t stocked up in the back. Sometimes you get order from non money prices emerging. Health care is free in socialist countries. Lots of sick people in health service and someone provides it. Collective planning authorities decide who gets goods. The average waiting time for coronary bypass surgery is 0 minutes in the US. 18.9% of the people in Sweden wait over 3 months for one. 30% in Canada. Not free in non money place. Humans have to wait 2 years for hip implants in Canada.
The US is more egalitarian than most countries in health care. Not as good as Singapore though (Rizzo’s opinion). Americans are treated better and faster in healthcare than in Canada.
We ration by equality. People line up to go to U of R. only 30% get in.
Buyers are demanders. Their goods are households and their factor is firms. Sellers are suppliers. Their goods are firms and their factor is households. THERE IS NO SUCH THING AS PERFECT COMPETITION.
As long as transactions don’t affect price or quantity for other people, that’s when trade works well. Demand is another application of margin. It is a relationship between the amount you wish to obtain and the sacrifices you must make to get it.
Wishes B A sacrifices
To go from a B to an A in a class, you need an extra 9 hours of work a week. This is a tradeoff. If you rush a frat a spend a lot of time doing that, then it becomes more costly to get an A in class. Moderate willingness to get an A when circumstances change.
Quantity demanding (A plan) (a number)- the amount of a good that buyers are WILLING and ABLE to consume at a particular PRICE.
Willing- Preferences
Able- constraints; incomes
Price- current price
Kidneys quantity demand is 90,000. This is because 90,000 people need it and the price is $0 so everyone can afford it.
Law of demand-other things equal. Quantity demand of a good falls when prices rise.
No comments:
Post a Comment