Information Gaps Flashcards
1
Q
What is an information gap?
A
Where consumers, producers or the government have insufficient knowledge to make rational economic decisions.
2
Q
When do information gaps occur?
A
when either the buyer or the seller has more information than the other.
3
Q
What is asymmetric information?
A
where buyers and sellers has different amounts of information, one group having more than the other.
4
Q
What does asymmetric information cause?
A
misallocation of resources and market failure
5
Q
Market examples of Asymmetric info
A
Health care- doctors
Tobacco- not fully aware of harmful effects
Pensions- young people not paying enough into pension
Moral Hazard- acting in own self interest, not aware of implications.
