Information Gaps Flashcards
1
Q
What are the two types of information gap?
A
asymmetric information
incomplete information
2
Q
Define incomplete information
A
when someone doesn’t have full information about the benefits or costs of their decision
3
Q
Define asymmetric information
A
when one party knows more than another party in a transaction
4
Q
How can the government fix incomplete information (underconsumption)?
A
e.g for schools
- regulation (must stay in edu until 18)
- provide information
- subsidies (e.g uni degrees)
- advertising
5
Q
How can the government fix incomplete information (overconsumption)?
A
e.g for cigarettes
- regulation
- advertising
- taxes (specific and ad valorem)
- provide info
