2.2 Imperfect Information
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4 Terms
Why is information important for decision making
Accurate information allows economic agents to make rational and informed choice that maximise utility
What is asymmetric information
A situation where one party in economic transaction has more or better information than the other
How does imperfect information affect markets
It can lead to irrational decisions and market failure because agents cannot make fully informed choice
What is the difference between imperfect information and asymmetric information?
Imperfect Information: A broad situation where parties don't have complete or perfect information during a transaction.
Asymmetric Information: A specific case of imperfect information where one party has more or better information than the other, leading to an imbalance and potential problems like adverse selection or moral hazard.
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