a)
The effects on the optimal level of search when there is an increase in the consumer's wage, keeping other things as constant.
Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.
b)
The effects on the optimal level of search when one seller guarantees to propose the lowest price on the market.
Concept Introduction: Search refers to the process of surveying a number of sellers or buyers to determine the lowest price. In case of imperfect knowledge, there exists price dispersion. At the optimal level of search, the expected marginal return is equal to the cost of search. Both consumers and sellers incur search costs in the hope to find the best alternative with their limited means.
c)
The effects on the optimal level of search when there is an improvement in the technology of gathering and transmitting market information.
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Chapter 14 Solutions
ECON MICRO (with ECON MICRO Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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