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How have companies such as ebay (and the internet more generally) lowers transaction costs? economics?

User ITmeze
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Answer:

1. Absence of Rent

2. No Salesperson's salary

3. Absence of Utility Bills

4. No inventory Holding Costs

5. Average Cost Per Unit

Step-by-step explanation:

Companies such as ebay (and the internet more generally) lowers transaction costs because of the following:

1. Absence of Rent: Companies such as ebay (and the internet more generally) lowers transaction costs because they do not pay store rent which is a significant business cost for offline businesses that operate in brick and mortar stores.

2. No Salesperson's salary: Online companies like ebay do not pay salesperson's salaries and by so doing they reduce transaction costs

3. Absence of Utility Bills: Online businesses like ebay do not pay utility billslike lighting costs and water rates etc, and this is another way of transaction cost reduction

4. No inventory Holding Costs: Online businesses do not incur transaction holding costs as they keep no warehouses for their inventory.

5. Average Cost Per Unit: In an internet business, you are bound to make profit even for one unit because you don't have to sell a number of units to cover for monthly fixed costs before you make profit. Transaction cost is same whether for one or a thousand units.

These are some of the ways online businesses have reduced costs.

User Rory Hunter
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