lectur13-page18

lectur13-page18 - Sounds rather vague I know Well when you...

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18 Consumer Decisions Are Based Upon: Additional expected costs and additional expected benefits derived from available information. Completely adequate information is seldom available, information itself is an economic good. When making a decision, look at the additional expected costs and additional expected benefits of the alternatives that you are assessing. Gather information on which to base your analysis and formulate your decision. You will probably never have what could be termed “perfect information”. You will probably always make some decisions with some uncertainty. The trick is to gather enough information to make the best decision possible. How much information should you gather? Well the rule of thumb is to gather information up to the point that the additional cost of acquiring more information is just equal to the additional benefit of the acquired information.
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Unformatted text preview: Sounds rather vague I know. Well, when you are in the grocery store in the check out line staring at that Snickers bar at the candy counter, how much information do you gather when making the decision to buy or not? Not much right? Maybe just the growl in your stomach is all the information you need. What is the price of that candy bar? How much information do you gather about a particular motor vehicle before you purchase it? What is the price of a motor vehicle these days? How much information do you gather about a house before you buy it? Do you agonize over such a large purchase? Do you wonder if you are doing the right thing (second guessing yourself)? As the commodity’s price increases, the value of obtaining information about the commodity before transacting any business increases as well....
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This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

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