Today's lecture was an introduction to supply and demand and we specifically talked about transaction costs and markets.
Transaction cost - cost of arranging and negotiating contracts and agreements. Three different types:
- "physical" = usually distance
- "ignorance" = not knowing other purchasing opportunities elsewhere
- Interference
A middleman's job is to get buyers and sellers together while also limiting as much as possible the transaction costs. They get a bad wrap because they don't actually produce anything, they just organize a transaction (sometimes poorly). Wegmans is a good example of a middle man because it reduces physical trans. costs by putting everything you need in one place, amongst other reasons.
Prices.... inform buyers and sellers on the value of something as well as its scarcity.
- MARKETS set prices
- many types of markets (goods, factor, etc.) and everything that applies to one market can apply to all other markets
Market - any collection of buyers and sellers (actual or potential).
- MARKETS --> prices emerge --> produce order.... what types of prices?
1. monetary 2. non-monetary 3. monetary AND non-monetary
Buyers = "Demanders" Sellers = "Suppliers"
- Goods - households - Goods - firms
- Factor - firms - Factor - households
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