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define perfect information/symmetric information
when producers and consumers have equal information about a good or service
define information gap/asymmetric information
when producers and consumers have unequal information about a good or service
state what an information gap/asymmetric information causes
irrational decision making
→ externalities
→ market failure
describe how an information gap/asymmetric information produces externalities
goods and services that produce negative externalities → over-consumed + over-produced
goods and services that produce positive externalities → under-consumed + under produced
market failure