Imperfect information

Question 1

Why is information important for decision making?

Answer 1

Accurate information allows consumers and producers to make well-informed choices that maximize utility or profit, leading to efficient resource allocation.

Question 2

What is asymmetric information, and why is it significant?

Answer 2

Asymmetric information occurs when one party in a transaction has more or better information than the other, often leading to market failure, inefficiency, or unfair outcomes (e.g., adverse selection, moral hazard).