Information asymmetries The following diagram relates to a market with an information asymmetry. The seller has more information about the good such as a used car market. DU is the demand curve for the uninformed public and DI is the demand curve if they were fully informed. Illustrate the price and quantity for the situation where the uninformed buyer drives the market. What would the price and quantity be if they were fully informed? Indicate the deadweight loss due to the information asymmetry and the transfer from buyers to sellers due to the asymmetry. How could this problem be solved? Consider a market in Australia (other than used cars) where thi
Information asymmetries The following diagram relates to a market with an information asymmetry. The seller has more information about the good such as a used car market. DU is the demand curve for the uninformed public and DI is the demand curve if they were fully informed. Illustrate the price and quantity for the situation where the uninformed buyer drives the market. What would the price and quantity be if they were fully informed? Indicate the deadweight loss due to the information asymmetry and the transfer from buyers to sellers due to the asymmetry. How could this problem be solved? Consider a market in Australia (other than used cars) where thi
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Task 4 – Information asymmetries
The following diagram relates to a market with an information asymmetry. The seller has more information about the good such as a used car market. DU is the demand curve for the uninformed public and DI is the demand curve if they were fully informed. Illustrate the price and quantity for the situation where the uninformed buyer drives the market. What would the price and quantity be if they were fully informed? Indicate the deadweight loss due to the information asymmetry and the transfer from buyers to sellers due to the asymmetry. How could this problem be solved? Consider a market in Australia (other than used cars) where this situation applies and explain how the government acts to partially or wholly solve the problem.
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