Author Question: List two implications of rent-seeking behavior. What will be an ideal ... (Read 122 times)

londonang · **on:** Jun 29, 2018

List two implications of rent-seeking behavior.

What will be an ideal response?

Question 2

Customers often complain about the high price of accessories for their cell phone including batteries, chargers and head sets. Often these items can cost even more than the price of the phone.

Explain using price elasticity why this might be the case.

paavo · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

(1.) Rent-seeking behavior consumes resources.
(2.) The government becomes a tool of the rent seeker.

Answer to Question 2

Once you have purchased a cell phone you are likely to have a more price inelastic demand for the accessories. Even though it would be nice to shop around the accessories of the competitors products are typically not interchangeable and in any event you likely have a two-year contract with your service provider that makes shopping around unattractive.