Information Gaps and Public Goods

What is an information gap?
Where consumers, producers or the government have insufficient knowledge to make rational economic decisions.
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What is symmetric information?
Where consumers and producers have access to the same information about a good or service in the market.
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What is asymmetric information?
Where consumers and producers have unequal access to information about a good or service in the market.
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Why might an information gap lead to market failure?
Because consumers and producers may have unequal knowledge about a product which would make transactions between them unequal and it could also lead consumers to make non-rational decisions.
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What causes imperfect information?
Misunderstanding the true benefits and costs of a product, uncertainty about costs and benefits, complex information when buying specialist products that some may find difficult to understand, inaccurate information, addiction and lack of awareness.
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What is a public good?
Those goods that have non-rivalry and non-excludability in their consumption.
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What is non-excludability?
Once a good has been produced for the benefit of one person, it is impossible to stop other from benefiting.
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What is non-rivalry?
As more people consume a good and enjoy its benefits, it does not reduce the amount available for others.
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What is a private good?
Goods that have rivalry and excludability.
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What is the free rider problem?
When an individual cannot be excluded from consuming a good, or service and thus has no incentive to pay for its provision.
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What is the problem if everyone is a free rider?
If everyone waits for others to provide a public good then it may never be produced which means firms will not provide such goods as it is difficult to gain profit meaning the government have to provide them with funds from taxes.
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Other cards in this set

Card 2

Front

What is symmetric information?

Back

Where consumers and producers have access to the same information about a good or service in the market.

Card 3

Front

What is asymmetric information?

Back

Preview of the front of card 3

Card 4

Front

Why might an information gap lead to market failure?

Back

Preview of the front of card 4

Card 5

Front

What causes imperfect information?

Back

Preview of the front of card 5
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