Applied Macroeconomics: Employment, Growth and Inflation

by Vivek Moorthy

customer markets and auction markets for products (He also made a similar distinction between casual and career labour markets). For instance, washing machines and doctor visits will come under the former, while oil and wheat traded on the commodities exchange market will come under the latter. This distinction somewhat corresponds to branded, differentiated products with different prices and unbranded homogenous products with a uniform price.13 In auction markets, prices are based on current demand and supply conditions and respond fairly quickly to changes in demand. There are no price tags and hence no major menu costs. Menu costs are one part of transactions costs. However, the informational costs of sorting out absolute versus relative price changes from quoted prices will still be there in auction markets.