1
Q
What is information failure?
A
When people have inaccurate or incomplete data so make nonoptimal choices
2
Q
Causes of info failure?
A
- Misunderstanding true costs
- Complex info
- Misleading info
- Lack of awareness
3
Q
What are information gaps?
A
When people have incomplete or inaccurate data so make potentially wrong choices
4
Q
What is asymmetric information?
A
Imbalance of information between buyers and sellers that can distort choices
5
Q
What is the Market for Lemons?
A
- George Akerlof
- Incentive to sell lemons (dud cars) and hold back peaches
- Second-hand car market
6
Q
Key aspects of asymmetric information?
A
1) Moral Hazard (insured consumers take higher risk)
2) Adverse Selection (those purchasing or selling are deceitful)
7
Q
What is bounded rationality?
A
Idea that decision-making cannot be entirely rational due to complexity of info
8
Q
Info gap diagram?
A
Economics Theme 1
flashcards
Decks in class (22)
# Cards
-
1.1 Social Science3
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1.2 Positive & Normative Statements4
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1.3 The Economic Problem4
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1.4 Production Possibility Frontiers10
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1.5 Specialisation & Division of Labour8
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1.6 Free market, Mixed and Command Systems6
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2.1 Rational Decision Making4
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2.2 Demand8
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2.3 Price, Income and Cross Elasticities of Demand15
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2.4 Supply4
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2.5 Elasticity of Supply3
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2.6 Price Determination3
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2.7 Price Mechanism6
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2.8 Consumer & Producer Surplus8
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2.9 Indirect Taxes and Subsidies10
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2.10 Alternative views of Consumer behaviour2
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3.1 Types of Market Failure5
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3.2 Externalities9
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3.3 Public Goods8
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3.4 Information Gaps8
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4.1 Government Intervention in Markets28
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4.2 Government Failure5
