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Economics_Ch08 - 08(186-221 EMC Chap 08 5:27 PM Page 186...

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Why It Matters S ometimes you can negotiate the price you pay for a good. You are about to buy a car, for example. The sticker price is $25,000. You offer the car dealer $23,000. He comes back with $24,500. You say $24,200 and the dealer accepts your offer. Sometimes you can’t negotiate the price you pay. You want to buy a shirt at a store in the mall. The price is $30. You don’t say to the clothing salesperson, “I’ll pay $25 for the shirt.” Instead, you pay $30. The lesson here is that not all goods are sold in the iden- tical type of market. In some markets, you negotiate price; in others, you don’t. Some markets are competitive; oth- ers are not. Knowledge of the material in this chapter will help you better understand why markets function in dif- ferent ways. 186 This farmer operates in a market that economists call perfectly competitive , which means that he is a price taker. You will learn about four different kinds of markets in this chapter.
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The following events occurred one day in July. 9:22 A.M. Barry walks around the car lot looking at new cars. A car salesperson approaches him and asks if he can be of any help. “I’m just looking around,” Barry says. “Did you have any specific model in mind?” the car salesperson asks. “Not really,” Barry says. The car salesperson walks and talks with Barry as he looks at the different cars on the lot. At one point, the car sales- person nonchalantly asks Barry what he does for a living. Why did the car salesperson ask Barry what he does for a living? 10:04 A.M. Melissa loves to read. She is currently in her local bookstore looking at the newest fiction. Melissa reads the first few pages of a book by one of her favorite authors. She then closes the book and checks the price— $29.99. She wonders whether she should buy it. On the one hand, she really wants the book. On the other hand, it’s expensive and she knows that she could wait until the book comes out in paperback. It would be much more affordable then. Why do book publishers publish the exact same book in hardcover and in paperback, but come out with the hardcover edition months before the paperback edition? 7:34 P.M. Ethan is at Petco Park in San Diego watching the San Diego Padres play the Milwaukee Brewers. He is thinking about going to the concession stand and buying a hamburger, some peanuts, and a soft drink. The price of the hamburger is $6.50, a bag of peanuts is $5.00, and a soft drink is $3.75. The total price for the three items is $15.25. “That is a lot of money,” Ethan thinks to himself. “I don’t know why food is so expensive at a baseball game.” Why is food so expensive at a baseball park? 9:59 P.M. George is getting ready to take his medicine. He heard a news report on television ear- lier this evening saying that the company that pro- duces his medicine actually sells the medicine for much less in foreign countries than it does in the United States. He pays $95 for a month’s supply, but understands that if he lived in India he could buy the same medicine for the equivalent of $30.
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