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Since we have been talking about prices, it is important to realize that not everyone need be aware of the relative price of a particular commodity for microeconomic analysis to have meaning and usefulness.

Consider an experiment that was carried out in the 1960s. Customers of a large number of gas stations in a given geographic area were quizzed at the end of each purchase of gas. The customers were asked about the price of the gasoline they had just bought. It turned out that most customers did not know the cost of the gasoline. They were vaguely aware of the approximate price but not of the exact price, and they were not aware of the possibility of obtaining gasoline at a lower price elsewhere. This would suggest to the casual observer that prices have no meaning in an economic system and that consumers are "irrational" or, at the least, lazy shoppers.

However, at the same time this study was done, a close tab was kept on the quantity of gasoline sold at several gas stations in the area. Lo and behold, it turned out that those gas stations which sold gasoline at a lower price sold more. Now, how can these two facts be reconciled? They can be reconciled by making a distinction between the average consumer and the marginal consumer. The average consumer of gasoline was perhaps unaware of the price of gasoline. However, the fact that the gasoline stations selling gas at a lower price sold more made it clear that some consumers were aware. They are the people we call the marginal consumers, the ones who are just on the borderline between buying more and buying less. As the price of gas goes up in one gas station, these marginal consumers switch to a less costly station. They are indeed the determinants of the price of gasoline. This situation shows that information is conveyed by relative prices; but for the price mechanism to work, that information does not need to be known with perfect accuracy by every individual acting in the marketplace.

This is perhaps another reason why critics of the rationality model used in microeconomic theory go astray. They are confusing average with marginal. On the average, it may be true that consumers do not have much information about what they buy. (It may not pay them to search for better information.) But on the margin, there are consumers who do care. For example, purchasers of gasoline for, say, fleets of cars or delivery trucks certainly will take the time, effort, and energy to seek out a supplier offering gasoline at a relatively lower price. Whenever these marginal buyers find a better deal, they will switch suppliers. It is these marginal buyers who keep suppliers on their toes and tend to cause the price of a given commodity to be uniform within a given geographic area, correcting, of course, for differentials in transportation costs and in quality.