Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It creates a perfectly elastic demand curve.
B
It leads to a shift in the demand curve to the left.
C
It results in consumers being unable to make informed choices, potentially leading to a less elastic demand.
D
It has no impact on consumer behavior or the demand curve.
Understanding the Answer
Let's break down why this is correct
Answer
Information asymmetry occurs when one party in a transaction has more or better information than the other. In a market, this often means that sellers know more about their products than buyers do. When consumers lack information, they may be less willing to purchase a product, which can decrease demand. For example, if a car seller knows about a vehicle's hidden defects but the buyer does not, the buyer might hesitate to pay a fair price, leading to lower demand. This can cause the demand curve to shift leftward, indicating fewer products are being demanded at each price level.
Detailed Explanation
When consumers don't have all the information, they can't make smart choices. Other options are incorrect because Some might think that all demand becomes very flexible; It's a common mistake to think that less demand means a shift left.
Key Concepts
consumer demand
demand curve
consumer behavior
Topic
Consumer Demand and Information Asymmetry
Difficulty
hard level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.