Chapter 3, Problem 14AA

To determine

Way to decide how much time is required to be spent on gathering information before making a purchase.

Answer to Problem 14AA

The decision for how much needs to be spent on gathering the information depends upon the opportunity cost of that time to a buyer. Every minute spent has an opportunity cost as that time cannot be used anywhere else.

Explanation of Solution

While gathering information about the product a buyer is going to get, the time he/she spends on getting the information about the various factors involved as per his/her demand of the product & the product available, is the opportunity cost to him/her and that should be a rational choice of the consumer.

He/she must analyze the cost of every minute spent on gathering information and should know the worth of sacrifice they are making. For example; if a consumer is gathering information to purchase a car, then a car involves a huge investment, so the decision should be taken putting sufficient time in knowing about the particular car and its related models.

Economics Concept Introduction

Introduction:

In any purchase to be made, there are always at least two scarce resources involved- INCOME & TIME. Even before you are to decide  how much income is to be spent on the product, you need to spend your time in deciding and gathering the information about the product you need to buy.