smart phones, information of all kinds can be shared very efficiently with nearly everyone on Earth. We can send and receive documents, pictures, videos, and audio files over the Internet and over our phones, and we can do it almost instantly.
The ease of sharing information has led to a huge increase in the amount of communication taking place. People are sharing information far more than they ever have. Think about all the e-mails you write, and the texts you send. Would you ever write that many letters?
The Internet does more than increase communication. It affects how people live their lives. Information is necessary for making decisions, so the Internet impacts how people make choices.
Easier, faster communication gives both producers and consumers access to a greater amount of information. People can learn more to help them make better decisions, and they can make these decisions more quickly. Producers can communicate almost instantly with their employees, their suppliers, and everyone else involved in making allocation decisions. Meanwhile, consumers have the latest information about prices, availability, and quality, enabling them to make the wisest buying decisions.
The amount and speed of information sharing can help improve the way people play the game of economics.
It is easy to communicate these days, even on the go.
E-Commerce
Access to information is not the only way the Internet has affected the economy. The Internet has created an entirely new type of economic activity called e-commerce. It refers to online buying and selling of goods and services. E-commerce is the electronic form of retail sales.
E-commerce has changed the way many companies do business. Almost every store has a website that sells items people previously had to buy in their stores. Many companies do not have actual stores at all; they only sell online.
One of the earliest pioneers of e-commerce was Amazon.com, and the company remains one of the largest online retailers. Amazon began by selling books on the Internet. After achieving rapid success, the company branched out into other retail areas. Amazon now sells products ranging from electronics and toys to clothing, jewelry, tools, and more. Amazon is a leader in e-commerce, and its business practices have influenced the entire retail industry.
E-commerce allows just about anyone to become a global seller of goods, services, and information online. Online business gives producers access to the largest market available, with over 1.5 billion people who go online on a daily basis.
The Internet is getting more popular among shoppers.
The Growth of E-Commerce
E-commerce started taking off in the late 1990s. Since 1999, buying and selling online has been the fastest-growing activity in the U.S. economy.
Both consumers and producers have gone online to buy and sell, and this trend does not seem to be stopping. The amount of money spent online has been growing very quickly. In 1999, there was $15 billion worth of online sales. The next year, that total had almost doubled to $29 billion. Ten years later, U.S. retail e-commerce sales had reached $169 billion in 2010. In fact, from 2002 to 2010 retail e-sales increased at an average annual growth rate of almost 18 percent, compared with 2.6 percent for total retail sales. In 2014, e-sales were about 5.9% of total retail sales.
The growth in e-commerce has been remarkably fast, but even with the fast growth of e-commerce, online sales represent less than 6 percent of all retail sales in the United States. This means that 94 percent of all goods sold are still purchased the old-fashioned way: in a store.
The Advantages of E-Commerce
Why is e-commerce becoming more and more popular? Using the Internet to buy and sell has advantages for both consumers and producers. That is why online shopping is growing so quickly.
The Internet makes it easy to compare prices. With traditional shopping, it takes multiple trips to different stores to compare their prices. There are Web pages that allow you to see how much dozens of different stores charge for a particular product. Or you can just click from one company’s website to another without having to go anywhere.
Online shopping saves time and money. You do not have to go anywhere to buy online. You do not have to spend time looking for parking, walking into and out of the store, or buying the gas to get you there.
Online shopping lets you get things not normally available nearby. With the Internet, the entire world is your store. Wherever something is made or sold, it can be shipped directly to you or anyone else.
You can ship gifts without an extra trip to the post office. You can do your gift shopping at the last minute and have the box sent right to the recipient. Most online stores give you the option of including a card and gift wrap.
Consumers like online shopping because of the convenience and availability. E-commerce has advantages for producers too. The Internet makes selling goods and services more efficient for many businesses by eliminating unnecessary costs.
Online businesses do not need as many employees. Instead of a bunch of salespeople and managers, online businesses only need to hire people to load goods onto trucks for shipping to their customers.
With e-commerce, there are fewer stores to run. Some businesses do not even have real stores at all, just warehouses. This saves on rent and labor.
The Internet is an easy form of direct advertising. Instead of putting ads in newspapers and magazines, and on television and the radio, a company’s website is an ad that consumers can look at any time. Advertising on other websites is also less expensive and reaches millions of viewers.
What Sells on the Internet?
E-commerce has done a lot for the computer industry. The sale of computers has grown a lot since the Internet began taking off. In 1990, few people had computers in their homes. By the year 2011, over 75% of all-American households had at least one computer.
People with computers are naturally drawn to e-commerce for computer products. It is easy to buy printers, scanners, wireless routers, and more from online sellers.
What else do you think sells well online? Popular online purchases, with the percentage of total online sales, include
• Computer products: 40%
• Books: 20%
• Travel: 16%
• Clothing: 10%
• Music: 6%
• Gifts: 4%
• Stocks: 4%
• The Internet and Economics
Developments in technology have always influenced the overall economy. Through the Internet, people have access to more information, which affects their decision-making process. And e-commerce is a fast-growing type of economic activity.
Whatever other technological changes are coming, it is likely that the Internet will continue to have a growing effect on the game of economics.
CHAPTER 1 SUMMARY
The Game of Economics
– Economics is a game played by everyone, in which every player has roles and goals.
– Like other games, the game of economics has rules, properties, and outcomes.
– Unlike other games, economics has no winner. This is mostly because there is no rule that says when the game has to end; in fact, the game of economics never ends.
– Economics is all about the allocation