Financial matters

Knowledge and past experience will help

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We noted that information is costly to acquire. Asking family and friends, searching through magazines such as Consumer Reports, and contacting your local Better Business Bureau are all ways of gathering information about products and potential sellers. The time and effort consumers spend acquiring information will be directly related to the value derived from it. Predictably, consumers will spend more time and money to inform themselves when they are buying “big ticket” items such as automobiles or air-conditioning systems than when they are buying pencils or paper towels. While no one has perfect foresight, experience- your own and that of others- will help you make better-informed choices. You have a pretty good idea of what to expect when you buy a cup of coffee at your favorite restaurant or ten gallons of gasoline at a service station you patronize regularly. Your expectations might not always be fulfilled precisely the same way every time (for example, the coffee may be stronger than expected or the gasoline may make your car’s engine knock), but even then, you will gain valuable information that will help you project the outcome of future choices more accurately.