Chapter 19 Flashcards
1
Q
What is information failure/ gap?
A
Not everybody has access to or knows all the information needed to make a decision to maximize welfare, caused by asymmetric information
2
Q
What is asymmetric information?
A
The buyer or seller has more information than the other and uses it to exploit the other
3
Q
What is the principal-agent problem?
A
The principal fails to see the benefits of something so allocates minimal resources toward it. The agent now has to encourage the principal to allocate resources to that something.
4
Q
Examples of asymmetric information?
A
Education (principal-agent problem)
Pension
Drugs
Financial Services
Adverts
