Recently, a bank was trying to decide what fee to charge for \"expedited payment
ID: 1168503 • Letter: R
Question
Recently, a bank was trying to decide what fee to charge for "expedited payments"—payments that the bank would transmit at a faster speed to enable customers to avoid late fees on cable TV bills, electric bills, and the like. To try to determine what fee customers were willing to pay for expedited payments, the bank conducted a survey. It was able to determine that many of the people surveyed already paid fees for expedited payment services that exceeded the maximum fees that they said they were willing to pay.
Analyze how does the bank's finding relates to economists' traditional focus on what people do, rather than what they say they will do.
Explanation / Answer
The Economists traditional views on the statements of economics are two
1. Positive
2. Normative.
The Normative statement are subjected to value discussion and are more of value judgements that whether the bank should raise the fee for expedited payments or not. Because in economics we are dealing with humans, this makes it rather more difficult to stick to what we consider to be value-free or positive economics without reference to our feelings.When our values are interjected into the analysis, we enter the realm of normative economics, involving normative analysis.
Now banks findings are that the consumers have already paid more than they were willing to pay. When we get suggestion from the customers of the bank they will always prefer less fee for the expedited payments. When the action of the customers are taken into account customers value the benefits received from the service.
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