Information Gaps

Question 1

Symmetric Information

Answer 1

Buyers and sellers have access to the same information (Only Appears in a Perfect Market)

Question 2

Asymmetric information

Answer 2

One group having more information than another.

An example is with a used car market, you do not know if you are buying a lemon or not. So most people are only prepared to pay average prices for a car that might actually be above average condition, but due to asymmetric information, the consumer does not know.

Question 3

Imperfect information

Answer 3

Where buyers or sellers or both lack information

Question 4

Information failure/gap

Answer 4

Where buyers or sellers or both don’t have information that is available to make a decision

Question 5

Moral Hazard

Answer 5

When an economic agent makes a decision in their own best interest knowing that there are potential adverse risks, and that if problems result, the cost will be partly borne by other economic agents.