Question

1. How would you define a “market” in the economics sense of the word? Give an example of a market for a good or services that does not rely on a physical store or location. (2 points)

1. How has technology affected how markets are formed (think in terms of transaction costs)? How might this affect prices?

2. How can a price ceiling that has been imposed on a particular product create a shortage? Provide a specific example. Think about whether this price ceiling would have to be above or below the market equilibrium price.

3. Give a real-life example of how each of these factors has affected the demand curve for a product (you are free to use different products for each of the examples).

Answer 1

QUESTION : 1 How would you define a “market” in the economics sense of the word? Give an example of a market for a good or services that does not rely on a physical store or location.

SOLUTION :

In ECONOMICS , Market is not a particular place but it means the entire area where buyers and sellers of a commodity are in such close contact with each other where the price of the same commodity tends to be same throughout that area .

Example : Telephone , Telegram , E-mail and fax etc. are the communication which are not necessarily the physical stores or locations to sell or purchase the goods and services .

Question :

Solution :

• 1. How has technology affected

Technology affected the present market situations such as to editing the business presentation , faster speed in making transactions , to find the consumer or seller on online platform , price of product can compare quickly  with other etc. All features of these of technology make the consumers and producers smarter than before .

how markets are formed (think in terms of transaction costs)?

• Markets are formed in terms of transaction costs which includes

Search and information cost : The cost search for a particular products that are available on the market , lowest in prices etc included here .

Bargaining and Decision costs : The cost on the acceptable agreement with the other party are included here .

policing and enforcement cost : these costs includes that all legal process which provide the details of given features or properties in the particular product are present or not in the product

• How might this affect prices?

All these things affect prices through give a one platform where no one can not be charged high price in the market just because of presence of technology and transaction cost in the market . This give a fruitful environment to buyers and sellers .