Problem

What do economists (and used-car dealers) mean by…

01:15

Problem 4 Easy Difficulty

Why might it be difficult for a buyer and seller to agree on a price when imperfect information exists?

Answer

Thus, this scenario then makes it difficult for buyer or seller to agree on a price as the perception
about the good is different.

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Principles of Microeconomics for AP® Courses

Chapter 16

Information, Risk, and Insurance

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Video Transcript

everyone. Today we're solving problem number four from Chapter 16 of the textbook, which basically discusses the concept of in perfect information and asks us, Why is it so difficult for Why might it be so difficult, rather for both buyers and sellers to when in perfect information exists in the market? So the first thing to understand about the problem with the definition of what in perfect information, really is, um, so in your textbook, I figured out this reading, which will give us the definition, and then it also hint really at the answer to this question. So it says that many economic trends, his actions occur in a situation of in perfect information. We're either the buyer, the seller or both are less than 100% certain about the qualities of what they're buying and selling. So this means that the fire may not be 100% sure of the quality of their goods when they're giving it to the cellar. The seller may not be 100% confident in what they're buying from the buyer in terms of the quality of the product or both may not be so. That's basically what it means the presence of in perfect information. This is really gonna give us our answers all put in green the presence of in perfect information. By the way, this is, um, in your reading from Chapter 16 about in perfect information. So that states that the president's ofhim perfect information can discourage both buyers and sellers from participating in the market. Buyers may become reluctant to participate because they cannot determine the product's quality. Now here's really where it gets down to. Brass tacks were told that sellers of high quality or medium quality goats may be reluctant to participate because it is difficult to demonstrate the quality of their goods to buyers. And now we're gonna learn why. So why it may be difficult for both of them to agree on a price. So for Sellers, the first thing to know is that it's difficult to demonstrate the quality of their goods. How are they gonna showcase their quality to the vibe for um, And since buyers cannot determine which goods have higher quality, they're likely to be unwilling to pay a higher price for such goods. So since fires cannot determines what which goods have higher quality, they're unwilling to pay a higher price so the seller may want to charge. Starting price for the fire is not gonna agree to that price because they don't they don't have the resources or the tools to determine which let's have higher quality, which good have lower quality. Therefore, that is why it's really difficult for a buyer and seller to agree on a price. One in perfect information exists in the marketplace. Let's keep reading on. This is just kind of re entering the information, in particular this sentence, it says one in perfect information is severe, and buyers and sellers are discouraged from participating. Markets may become extremely, extremely thin as a relatively small number of Byron sellers attempt to communicate enough information so that they can agree on a price. So you can see it takes a lot of work for the buyer and the seller alone to communicate and cohesively, you know, from both ends of the spectrum, agree on a price. So there have it. If you guys enjoyed my video explanation, please hit the like one and next to it. I hope you all have a nice day and thank you for watching

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Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses

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Problem

What do economists (and used-car dealers) mean by…

Problem 4 Easy Difficulty

Why might it be difficult for a buyer and seller to agree on a price when imperfect information exists?

Answer

Thus, this scenario then makes it difficult for buyer or seller to agree on a price as the perception
about the good is different.

Related Courses

Principles of Microeconomics for AP® Courses

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Discussion

Top Educators

Recommended Videos

Watch More Solved Questions in Chapter 16

Video Transcript

Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses

Thus, this scenario then makes it difficult for buyer or seller to agree on a price as the perceptionabout the good is different.

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw, David Shapiro, Timothy TaylorPrinciples of Microeconomics for AP® Courses

Thus, this scenario then makes it difficult for buyer or seller to agree on a price as the perception
about the good is different.

Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses