Chapter 5, Problem 10AA

To determine

To explain: The factors that decide what and where to shop.

Explanation of Solution

In comparison shopping, basically, two factors are the main important that should be considered that is the distance of the shop, whether it is far from the home or nearby the home. Secondly, whether the shop has all the required goods or not. The comparison shopping has the opportunity cost, that is time. If the shop is far from the home then it will consume more time to reach there. Thus, more time means more opportunity cost involved in shopping. Similarly, if a shop does not contains all the required goods then the consumer will have to search for other shops and this will consume time and increase traveling cost. Therefore, an increase in opportunity cost will outweigh the savings.

So, the consumer will prefer to buy from the shop that is nearby and contain all the goods. Secondly, consumers will buy those goods which are necessary and essential.