From the course: The Undercover Economist: The Economics behind Everyday Decisions (Blinkist Summary)
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Lack of information
From the course: The Undercover Economist: The Economics behind Everyday Decisions (Blinkist Summary)
Lack of information
- [Instructor] Blink number four, a lack of information can seriously distort the market. In the media and in the halls of university economics departments, there are many who constantly extol the genius and fairness of the free market system, which they believe is the most efficient method of ensuring that everybody gets what they want and need at the right price. But the market has a major problem, it can easily break down when people are dealing with limited or concealed information. This is known as the information gap. One popular example of this is found in the used cars market. When buying a used car, you might end up with a peach, a car that works well, or a lemon, a car that is basically junk. As a prospective buyer at a used car dealership, there is no way to tell which is a peach, and which is a lemon. The seller on the other hand, knows exactly which is which. If a buyer's budget is small, say $1,500,…
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