Shoe leather cost: Difference between revisions
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If prices are stable, consumers and firms come to have some knowledge of what is a good price for a product and which suppliers are likely to charge less than others. At times of rising prices (inflation), this knowledge gets distorted and firms and consumers no longer have a good idea on what is a good price. This will lead to more consumers shopping around, (wearing out the leather on your shoes), which in itself is a cost. |
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'''Shoe leather cost''' refers to the cost of time and effort (more specifically the [[opportunity cost]] of time and energy) that people spend trying to counter-act the effects of [[inflation]], such as holding less cash and having to make additional trips to the bank. The term comes from the fact that more walking is required (historically, although the rise of the [[Internet]] has reduced it) to go to the bank and get cash and spend it, thus wearing out shoes more quickly. The actual cost of reducing money holdings is the additional time and convenience that must be sacrificed to keep less money on hand than would be required if there were no inflation. |
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==Sources== |
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http://www.andrew.cmu.edu/course/88-301/data_of_macro/shoe_leather.html |
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[[Category:Finance]] |
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[[Category:Monetary economics]] |
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{{econ-stub}} |
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[[de:Schuhsohleneffekt]] |
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[[ko:구두창 비용]] |
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[[vi:Giả thuyết chi phí da giày]] |
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Revision as of 12:04, 13 April 2011
Shoe leather cost refers to the cost of time and effort (more specifically the opportunity cost of time and energy) that people spend trying to counter-act the effects of inflation, such as holding less cash and having to make additional trips to the bank. The term comes from the fact that more walking is required (historically, although the rise of the Internet has reduced it) to go to the bank and get cash and spend it, thus wearing out shoes more quickly. The actual cost of reducing money holdings is the additional time and convenience that must be sacrificed to keep less money on hand than would be required if there were no inflation.
Sources
http://www.andrew.cmu.edu/course/88-301/data_of_macro/shoe_leather.html
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