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Consumer Demand and Information Asymmetry
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What is the term for a situation in which one party in a transaction has more or better information than the other party?

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Choose the Best Answer

A

Market equilibrium

B

Information asymmetry

C

Consumer surplus

D

Price elasticity

Understanding the Answer

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Answer

The term for a situation where one party in a transaction has more or better information than the other party is called "information asymmetry. " This often happens in markets where sellers know much more about their products than buyers do. For example, if a car dealer knows that a used car has hidden problems but does not share this information with the buyer, the dealer has an advantage. This imbalance can lead to poorer decisions by the less informed party, which can hurt both consumers and the market as a whole. Understanding this concept helps us see why transparency and trust are important in any transaction.

Detailed Explanation

This term means one side knows more than the other. Other options are incorrect because Market equilibrium is when supply and demand balance; Consumer surplus is the extra benefit a buyer gets when they pay less than what they are willing to pay.

Key Concepts

information asymmetry
Topic

Consumer Demand and Information Asymmetry

Difficulty

easy level question

Cognitive Level

understand

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