1.19 Information Gaps Flashcards
What is perfect information?
When a buyer/seller has a complete understanding of the quality and nature of a good or service
What is imperfect information?
When a buyer/seller lacks a complete understanding of the quality and nature of a good or service
What is symmetric information?
When both buyers and sellers have equal amounts of knowledge about a good or service
What is asymmetric information?
When a buyer or seller has more information about a good or service than the other party
What is an information gap?
When either the buyer or the seller doesn’t have access to the full information needed for them to make a fully informed decision and behave rationally.
Why are goods under provided in a free market economy?
Because of the free rider problem
Is the NHS and state education a public good?
No it isn’t. There is rivalry in the consumption of these goods. More appropriate to describe them as goods with external benefits, or merit goods.
What is marginal social benefit equal to?
Marginal private benefit + marginal external benefit
Diagram for a positive production/consumption externality
Check notion
Give some examples of positive consumption externalities
Vaccinations
Gym memberships
Healthy food
Public transport
Give some examples of production externalities
Beekeeping
Research and development
What is marginal social cost equal to?
Marginal private cost + marginal external cost
Diagram for negative production/consumption externality
Check notiom
Some examples of negative consumption externalities
Alcohols
Cigarettes
Junk food
Give some examples of negative production externalities
Factories that emit pollutants
Coal power plants
Bars and clubs that play loud music
