Information economics applies unique properties of information to economic theory. In the information economy, consumption is not limited and scarcity does not affect value. To create commerce, information must be presented in a useful way, such as grouping it. Some may choose college for the packaged information, but not everyone will.
Information economics is a theory in microeconomics that developed simply because of the unique nature of information. While nearly everything in the world has become a commodity, including information, not everything is treated the same. Information economics takes these unique properties of information and applies them to more acceptable economic theory.
In the normal economy, the buying and selling of goods means that those goods can no longer be used by others, at least not in the same condition. If one person buys a shirt, other people are naturally deprived of wearing it. This deprivation theory is central to most economic theories.
It just doesn’t exist in the information economy. One person who consumes information does not prevent another person from consuming that information. Everyone can share equally in consumption, according to the theory of the information economy. While it may be true that buying a book deprives others of buying it, that doesn’t stop the information from being consumed. Rather, it just deprives others of using that particular copy of the information.
In normal economic theory, items for trade are usually valued based on scarcity and demand. If products become scarcer or demand increases while supply remains the same, value increases. However, with the information economy, this is not the case. Information is not scarce and is becoming less and less scarce. Again, normal economic theory would not since do in this case.
Therefore, the economics of information dictates that the monetary value of information must be presented in a way that creates an opportunity for commerce, if that is the ultimate desire of the supplier. Otherwise, those looking for the information will go to sources where the information is free. One way to achieve this is to group the information in a way that makes it more useful, giving the consumer an advantage over others without the grouped information.
That’s why people might choose to go to college, for example, instead of just studying a subject or course on their own. While the same information they learn in the classroom may be available in other applications, it will not be presented or grouped in the same way. So there’s a greater chance of retention and practical application if it’s in a classroom, some believe. The information economy predicts that some will choose college based on this package. However, the theory fails to say that everyone will choose this alternative.
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