📚 Learning Guide
Consumer Demand and Information Asymmetry
easy

Consumers not revealing their true willingness to pay for a product is to information asymmetry as: Free riders benefiting from public goods without contributing is to what?

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Learning Path
Learning Path

Question & Answer
1
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2
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3
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4
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Choose the Best Answer

A

Market efficiency

B

Public goods provision

C

Price elasticity

D

Consumer surplus

Understanding the Answer

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Answer

Consumers not revealing their true willingness to pay for a product creates a situation called information asymmetry, where one party has more information than the other. Similarly, free riders who benefit from public goods without contributing create a problem known as the "free rider problem. " This occurs because public goods, like clean air or national defense, are available to everyone, whether they pay for them or not. For example, if a person enjoys a public park without paying taxes, they are a free rider, as they benefit from the park's maintenance funded by others. Both scenarios illustrate how unequal information or contributions can lead to inefficiencies in the market or society.

Detailed Explanation

Free riders enjoy public goods without paying for them. Other options are incorrect because Market efficiency means resources are used well; Price elasticity is about how demand changes with price.

Key Concepts

Information Asymmetry
Free Rider Problem
Market Inefficiencies
Topic

Consumer Demand and Information Asymmetry

Difficulty

easy level question

Cognitive Level

understand

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