Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It shifts the demand curve to the left
B
It causes the demand curve to become steeper
C
It can lead to a less accurate representation of consumer preferences on the demand curve
D
It has no effect on 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 terms of consumer demand, if sellers know more about a product's quality than buyers do, this can lead to buyers being unsure about how much they should be willing to pay. For example, if a used car dealer knows a car has a hidden problem but the buyer does not, the buyer might be hesitant to pay a high price, which can lower demand. This uncertainty shifts the demand curve to the left, meaning fewer people are willing to buy the product at previous price levels. Ultimately, information asymmetry can create a gap between the actual value of a product and what consumers are willing to pay, affecting overall market demand.
Detailed Explanation
When some people know more about a product than others, it can change how much people want it. Other options are incorrect because Some might think that less information means less demand; A steeper curve suggests that people will buy much less if prices go up.
Key Concepts
demand curve
Topic
Consumer Demand and Information Asymmetry
Difficulty
easy level question
Cognitive Level
understand
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