1.2 Imperfect information

Question 1

What is perfect information?

Answer 1

All information on price, quality and utility available from goods and services. Everyone knows everything

Question 2

What is imperfect information?

Answer 2

Not everyone knows all information such as price, quality and utility available from goods and services
Imperfect information leads to consumers making decisions that does not necessarily lead to utility maximisation

Question 3

What is asymmetric information?

Answer 3

When one party in a market transaction possesses less information relevant to the exchange than the other party

Question 4

Why is information failure a type of market failure?

Answer 4

Information failure is a type of market failure where consumers or producers:
do not have symmetric information
have asymmetric information

This can then lead to a misallocation of resources

Question 5

What is symmetric information?

Answer 5

Symmetric information is when all the relevant information is known by both parties

Question 6

What is perfect knowledge?

Answer 6

Perfect knowledge is a theoretical concept which occurs when all consumers in a market are fully aware of price, quantity available and other relevant information for all products when making buying decisions

Everyone has all relevant information