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Seminar on the role of information

in an economy

Presenter :103) Mukti nath rijal

102) Mukesh rijal

104) Prattikchy acharya

Presented to:Bibu Ratna Tuladhar

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"information economy"

"information economy" has been widely used in the development literatureto reflect the new development stage of the advanced countries.

"information society" is also used instead of the term information economy.

It does not matter which term is used, a different economic and social

development stage has come out.

The US, Japan and some European Union countries have transformed fromthe industrial society to the information society/information economy since

the early 1950s.

Hence, the characteristics of the new economy shaped after 1950s.

Although some sociologists and economists such as Weber, Marx and

Schumpeter saw main characteristics of the new society before 1950s- theirexplanations were Utopian because the characteristics of the new society

did not come out clearly at that time.

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Contd..

After the industrialization spread all over the world, some countries such as the UK, Germany andthe US reached the advance level of industrialization The characteristics of the new economy were defined by looking at economic

and social structures of these countries

The widely known characteristics in the literature can be found in Bell'spost-industrial society paradigm. These are (Bell, 1973, p. 14):

(i) Economic sector; the change from a good producing to a service economy,

(ii) Occupational distribution; the pre-eminence of the professional andtechnical class,

(iii) Axial principle; the centrality of theoretical knowledge as the source ofinnovation and policy formulation for the society.

(iv) Future orientation; the. control of technology and technologicalassessment,

(v) Decision-making; the creation of a new 'intellectual technology'.

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Transaction Costs

Those costs associated with bringingbuyers and sellers together.

The costs associated with taking exchangepossible are TC (transaction Cost) such as

Travel cost Negotiation cost Property rights enforcement cost Cost of acquiring information

TC are those costs associated with bringingbuyers and sellers together

Uncertainty about current or future prices andproduct quality.

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Information cost

Costs of acquiring information onprices, product qualities, and productperformance.

costs of telephone, shopping, checkingcredentials, inspecting goods,monitoring honesty, placing ads,consumers reports ,consumer reports in

order to acquire more economicinformation.

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Contd..

Information is costly because of limitedcapacity to acquire, process,

store and retrieve facts and figuresabout prices, qualities and location ofproducts.

Information is distributed over thepopulations in bits and pieces.

Internet reduced information cost

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Contd..

TC are affected by IC.

Economic transactions cannot takeplace without information about buyerand seller

Information about the prices charged by

different retail outlets were free assumingthat no location is more convenient thanother, the same commodity would sell forthe same price, as predicated by thetheory of perfect competition.

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Information is not free; real resourcesmust be devoted to gathering information.

Each individual has uniqueinformation of which beneficial usemight be made.

Information is typically a scare and

valuable commodity

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The economy of search

all buyers pay the same price for theproduct: competitive market.

Prices of homogenous goods differ from storeto store.

Transaction costs of going to cheapest storemay exceed the advantage of lower price.

Same good in a different location isconsidered a different product.

Information gathering and price dispersion

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Conclusion

TC are those costs associated withbringing buyers and sellers together.

IC are the costs of acquiring information

onprices, product qualities, and productperformance.

TC are affected by IC

all buyers pay the same price for theproduct: competitive market.

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THANK YOU