Thanks to the Internet and all kinds of online resources con

Thanks to the Internet and all kinds of online resources, consumers can now use asymmetric information for their advantage. For instance, buyers can research insurance rates, car prices, and restaurants and hotels online and learn a lot about what other consumers say about these businesses. In the past, these buyers had much less information to use when judging the qualities of goods, services, or companies.

At the same time, however, this advantage is a double-edged sword, because companies profit from the Internet too, as they use online resources to develop informational advantages over consumers. For instance, companies can now use online research tools such as \"cookies\" to determine the viewing behavior and the \"clicking\" habits of consumers, and thus develop marketing campaigns to take advantage of carefully sourced consumer habits. Discuss.

Solution

Modern economy is a market economy. It is a mechanism which can be used to channelize scarce inputs in the production of right commodities for maximizing production and welfare of the society. There are two opposing forces demand and supply. Both of them are related with the price. Rise in price reduces demand and so the diagram showing this relation is inverse. Just opposite is for supply. Increae in price increases profit of the producer. So supply will rise. Market fixes the price where total demand and supply are equal.

An economy is effecient if price is not controlled by one or two firm. It should be fixed by market mechanism. In this context effeciency will depend upon how much perfect is the demand and supply function. It depends upon the availability of information. If information about the product quality, quantity, usability and other criterias are not properly known to customers, then suppliers can deliberately show a rosy picture of the product to get it sold. Ultimately consumer has to suffer. Same thing may happen to a supplier. They should have proper idea about the consumers requirements, taste, utility, market conditions etc. Otherwise produced goods will remain unsold.

Thus availability of perfect information is a criteria for judging effeciency of the market economy. internet has a very crucial role in this connection. Consider some instances where internet can help either side proper information to make accurate demand and supply decision.

1. Suppose a customer wants to visit a location in summer holidays. He wants to book a hotel. He can search different hotels availability from respective sites. It will give them information like price, availability, views of the hotels, facilities available, location, special advantages etc. Also opinions of other consumers visting the hotel earlier are available. After going through the opinions a perfect selection can be made.

2. Hotel owners after considering the viewsof the visitors and also about the comments on competitive hotels. It will give a proper idea about their plus and mius points. The areas of improvments required can be identified. Accordingly necessary developments can be introduced to maximize customers satisfaction.

3. Research department from internet can get ideas to develop new and improved product. It will make growth of the firm possible and will also maximize satisfaction of customers.

4. Data available in internet can enable a firm to make a proper projection of companys sale, cost and revenue.

Thus internet has made economy more effecient by providing required information to consumers and suppliers. It has made market more iformative and competitive to maximze overall welfare.