Week 3 - Friday (Chapter 4 Questions)

a. Choose a passage from the reading that you found particularly interesting. Why was it interesting.

"The search for information is the central experience of life in the bazaar," said Geertz. It is "the really advanced art in the bazaar, a matter upon which everything turns (McMillan 41)." Nowadays with advancement of the internet and many possessions of computers or laptops, students can easily have access to information. Information can be prices of goods, information on stores that you buy from, and even education. Anything can be done online. It is interesting that search for information in bazaar is such a challenge. With such imperfect distributed information, the suppliers much have easier time raising the prices or tricking their consumers.

b. What does the author mean by transaction costs? Give examples.

A transaction cost is a cost that occurs while making an economic exchange. "The search for information is the central experience of life in the bazaar." The time, the effort, and possibly some money that was spent on attaining information are all part of transaction costs. Transaction costs still exist in today's world for K College student when we shop, only perk is that our transaction cost is very minimal thus easy to disregard. When we shop for something online or look up prices online, our only transaction cost would be time spent on looking things up.

c. Simple economic model often assume perfect information (everyone knows everything, everywhere). What effects arise from imperfect information? Who gains and who loses when information is unevenly distributed?

From the assumption that everyone is close to omniscient arises problems: winners and losers. Winner are people with more information. "Knowledge is power" quoted Francis Bacon. Truly if you know more about certain product, you will benefit. Take for example a headphone. Let market price for our product be $200, when suddenly there is an end of the year sales bringing down the price down to $150. Person who attains that piece of information will seek out stores with the offer, thus gaining extra customer satisfaction because of low price! On the other hand, the losers are those who fails to receive the same information. Unknowingly, they will spend more money on the same product.