How does information asymmetry in a market affect consumer demand and price elasticity, potentially leading to market failure?

Information asymmetry occurs when one party in a transaction has more or better information than the other. In a market, if consumers lack important information about a product, they may make poor purchasing decisions, which can lead to lower demand for that product. For example, if people don't know that a certain brand of medicine is more effective than others, they might choose a cheaper, less effective option instead. This situation can cause prices to stay high for the better product, as consumers are not aware of its true value, leading to a mismatch between supply and demand. Ultimately, this can result in market failure, where resources are not allocated efficiently, and consumers end up with lower-quality products.