Edexcel A Level Economics A:复习笔记1.3.4 Information Gaps
Information Gaps
- Information gaps?exist in nearly all free markets and distort market outcomes resulting in market failure
- One of the underlying assumptions of a free market is that there is?perfect information?in the market
- This means that buyers and sellers have exactly the same level of information about the good/service. This is called?symmetric information
- In many markets buyers and sellers have different levels of information. This is called?asymmetric information. For example, there is?asymmetric information?in the used car market - sellers know more about the vehicle than the buyers
- ?Asymmetric information?distorts socially optimal prices and quantities in markets resulting in?over-provision?or?under-provision?of goods/services
- For example, goods/services with?dangerous side effects?would be sold in lower quantities if buyers were aware of these effects (consider the VW emissions scandal).?Fewer?factors of production should be allocated towards producing these
- Similarly, goods/services with?extra benefits?would be sold in higher quantities if buyers were aware of them.?More?factors of production should be allocated towards producing these
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