1.2 Micro Flashcards
What causes irrational decision making?
Imperfect or Asymmetrical information
What is Asymmetrical information?
Too little or too much information
Knowing more or less information than other parties
Can be excluded
Costly to acquire information
What causes information/market failure?
Lack of symmetric information
What can asymmetric information lead to?
Misallocation of resources
What is symmetric information?
When all the relevant information is known by both parties
What is information symmetry?
When some parties have more information than others
What is perfect knowledge?
A theoretical concept
All consumers are fully aware of all relevant information when making purchasing decisions
What does perfect competition mean?
That there is perfect information
What are free markets likely to do?
Misallocate resources
