Question

Emma wants to sell her motorcycle, and Friedrich is looking for a used motorcycle to buy. Friedrich takes it for a test drive. Emma knows that the clutch is going out on her motorcycle, the fuel filter is leaking, and the tires will need to be replaced soon. If she does not disclose this information to Friedrich and he cannot tell from his test drive, this is an example of

Answer 1

Answer: asymmetric information

Explanation:

Asymmetric information is also called information failure, it occurs when one person possesses more material knowledge than the other person in a transaction. It occurs when the seller of a good or service has more adequate knowledge than the buyer of the goods.

Emma has more knowledge of the bicycle because he owns it than friedrich who wants to buy. Asymmetric information is often very important especially in a profession as it makes an individual stand out and makes such person continuously search for more knowledge to be a master in a field.