1.3.4 Information gaps

Question 1

What is symmetric information?

Answer 1

This means that buyers and sellers have exactly the same level of information about the good/service. This is called symmetric information.

Question 2

What is asymmetric information?

Answer 2

In many markets buyers and sellers have different levels of information. This is called asymmetric information.

Question 3

An example of asymmetric information?

Answer 3

There is asymmetric information in the used car market - sellers know more about the vehicle than the buyers.

Question 4

What does asymmetric information?

Answer 4

Asymmetric information distorts socially optimal prices and quantities in markets resulting in over-provision or under-provision of goods/services.