a) Information gaps

• 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