LS19 - Information Gaps Flashcards
Perfect Information
When a buyer/seller has a complete understanding of the quality and nature of a good/service.
Symmetric Information
When buyers and sellers have equal amounts of knowledge about a good/service.
Imperfect Information
When a buyer/seller lacks a complete understanding of the quality and nature of a good/service.
Asymmetric Information
When a buyer/seller has more information about a good/service than the other party.
Information Gap
When either the buyer/seller doesn’t have access to the information needed for them to make a fully-informed decision.
Demand Curve
Marginal Benefits = Marginal Private Benefits = Marginal Social Benefits
Supply Curve
Marginal Costs = Marginal Private Costs = Marginal Social Costs
Marginal Social Benefit Equation
MSB = Marginal Private Benefit + Marginal External Benefit
Examples Of Positive Consumption Externality
Vaccinations
Gym Memberships
Healthy Food
Public Transport
Examples Of Negative Consumption Externality
Alcohol
Cigarettes
Junk Food
Marginal Social Benefit Equation
MSC = Marginal Private Cost + Marginal External Cost
Examples Of Negative Production Externality
Factories that emit pollutants
Coal power plants
Bars and clubs playing loud music
Examples Of Positive Production Externality
Beekeeping
Research And Development
