Physically identical things are often sold for different prices, usually because of
accompanying conditions that are quite different.
If a camera store sells a particular make and model of camera for $300 and the discount
house sells it for $280, it may still pay to go to the camera store where another make and
model of camera is available for $250 that does what you want to do just as well or
better.
If the camera store’s larger selection and more knowledgeable sales staff enables you to
buy only what meets your own needs, there may be financial savings there, as well as
better advice on operating the camera, even if the discount house charges a lower price
for each particular camera that both stores carry.
The point here is not to claim that it is generally better or generally worse to buy cameras
at a camera store or at a discount house. Instead, the point is that what is being sold in the
two places is not the same, even when the cameras themselves are physically identical.
The stores are charging different prices because they are supplying different things that
have different costs to the seller, as well as to the buyer.
Inventory is a substitute for knowledge. Since you don’t always know just how much inventory you are actually going to need and since inventory costs money, a business enterprise must try to limit how much inventory it has on hand. Those businesses, which have the greatest amount of knowledge and come closest to the optimal size of inventory, will have their profit prospects enhanced. Just as prices in general affect the allocation of resources from one place to another at a given time, so returns on investment affect the allocation of resources from one time period to another. A high rate of return provides incentives for people to save and invest more than they would at a lower rate of return. – A higher rate of return encourages people to consume less in the present so that they may consume more in the future. It allocates resources over time. The present value of an asset is in fact nothing more than its anticipated future returns, added up and discounted for the fac...
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