Econ edexcel a level notes theme 1, Study notes of Economics

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Information gaps - when one party has superior information to another party. e Usually the seller has more information then the buyer and so can charge them higher prices. Symmetric information - when buyers and sellers have potential to access the same information. e Imformation gaps lead to market failure as there is a misallodation of resources as people do not buy things that maximise their welfare. This means that consumer demand for a good or producer supply may be too high or too low and so price and quantity are not at the social optimum position. Economic agents are unable to make rational decisions due to information gaps. e More advertising leads to information gaps as it is designed to change the attitudes of the consumer so that they purchase the good. It could cause them to think the benefits are greater than they actually are. Improvements in technology reduce information gaps as people can get more information.