The significance of asymmetric information
Asymmetric information exists when one person in a deal knows more than the other. This knowledge gap can push markets toward bad or unfair outcomes.
Real World
In the UK used-car market, platforms like Auto Trader introduced verified history checks (HPI checks) specifically because sellers knew of hidden faults that buyers could not detect, driving down prices for all cars.
Exam Focus
Name Akerlof's 'market for lemons' and link it to adverse selection — high-mark answers connect the theory to a specific market failure outcome.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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