On day 12 of the Year 13 recap we review the concept of asymmetric information and why it can cause markets to fail.
Market failure arises because of a misallocation of resources and this results in a drop in social welfare. One influential factor behind this misallocation is sometimes if there is an unbalanced stock of information held by the two opposing sides of the market i.e. the buyers and the sellers.
Often the side of the market that is armed with the greatest amount of information can exploit this position and this is the driving force behind the failure of the market. Asymmetric information is a very useful concept that applies to a wide range of different industries and markets and therefore can be used within the body of most essays
Here Jack guides you through the revision slide on asymmetric information.