Class summary 11/2

Transactions Costs

a.     physical

b.     ignorance

c.      interference

The way to get rich is to find a way to limit transactions costs.

Middleman-they do not produce anything ( wegmans, food in there is more expensive than you get from farmer directly )

Wegmans reduce the transaction costs, we do not need to find things in the first place, we do not need to travel some distance to get the production.

In small group, information problem is much easy to overcome

Prices : they are themselves’ information (they tell us what is scarce)

How price is determined and who sets the rule?

MARKETS: “GOODS”

Prices come from markets

Any collection of buys and sellers forms a market

Any decentralize unorganized market between potential sellers and buyers

Prices emerge to produce order

a.     $ prices

b.     non-$ prices

c.      $ + non-$

Buyers: Demanders

a.     goods: household

b.     factors: firms

Sellers: Suppliers

a.     goods: firms

b.     factors: household