Wednesday, November 13, 2013
What Do Stores Prefer? M1 or M2?
Last year in AP US History, we had talked about what kind of money components stores prefer when selling their products. Stores prefer the M1 (a medium of exchange) component, especially something like gift cards because customers have already paid M1 to the store without exchanging any products from the store in it. They would rather have an M1 than an M2, such as credit cards, means of an exchange. The money that is given from a credit card isn't the fastest way a company can get the money, therefore there is an opportunity cost of time in which that money is received for the the company.
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I like how you thought about money supply from a business's perspective. I never thought of the fact that credit card payments do take a longer time to be paid and processed as revenue to the company. I also like how you explained why a giftcard would be better for the store because the customer already paid the money but will spend it later.
ReplyDeleteI like how you've connected what we've learned this year to our APUSH class last year. This applies to everyday life since there are several places that still don't accept credit cards and prefer cash.
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