Q. Like supermarkets, full- service department stores like Macy's are generally in decline. What factors might these types of stores have in common behind their declines? How would you determine which were important and which are not?
Demand with zero transaction costs is Q1D = 50 - P and supply is Qs = -7 + 2P.
a. Verify all of the prices and quantities calculated in the discussions.
b. Now assume that intermediaries come from a competitive market with an equilibrium price of $8 per unit for their services, that is, any buyer or seller who wants to an intermediary's services must pay $8 for them. What is the maximum per unit that sellers are willing to pay intermediaries if hiring those saves buyers $8 in transaction costs?
c. If buyers pay $8 per unit to the intermediary but sellers offer to rebate part of that expense to buyers?