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Date Created: 04/29/14
Econ 200 424 Transaction costs Supply beh3Vi0T MC supply when impose market price Marginal cost gt Q sold Market Supply Curve A 2 individual A A Market supply suppliers lateral sum 1 39 Market equilibrium Market supplydemand together After E buyer willing to forgo less than seller Willing to gain ALL GAINS FROM TRADE EXHAUSTED E market equilibrium Most gains at this point Features of organized markets There is a single price for most goods because of competition o Market adjusts to equilibrium price There is no haggling o Cost of haggling time takes too long miss other opportunities o Greater opportunity costless haggling Price to highsurplus sellers compete prices drop Transaction costs Government effects Transaction costs characteristics that exist in markets where mutually bene cial trade dif cult l 2 3 4 Info cost about Where buyerseller is Where goods are Costs of establishing salient features of goods traded Cost of reaching agreement over price of good haggling Costs of establishing and enforcing property rights over goods traded EX car rental has high transaction costs Effect of goV t tax and subsidy measures on demand and supply behavior 0 P subsidy MC o PMCsubsidy o GoV ts lower MC of seller when they give them a subsidy o Encourages seller to produce more