Search cost

Imagine you're looking for your favorite toy in a big toy store. You have to go through a lot of shelves and aisles to find it. This process can take a long time and can be difficult if you don't know exactly where your toy is. The time and effort you put into searching for your toy is called “search cost”.

Similarly, in the world of economics, search cost refers to the effort, time, and money that someone has to spend to find the best product or service in the market. It can be financial or non-financial. For instance, when you are buying a new car, you may have to visit several car dealers to find the best deal. This would take time and effort, which is your search cost.

Search cost exists because you have to put in labor, time, and resources to explore and locate the desired or correct product. Economists believe that search costs increase the overall cost of products and services, because the consumer has to bear the additional cost of finding the right product in the market.

However, the internet has made it easier to search for the right product at a reduced cost and in less time. For example, you can use a search engine to find a product online instead of going to different shops. With this, people can make better buying decisions and reduce their search cost, which in turn can lower the overall cost of products or services.