Question

Imagine consumers are fooled into thinking that a good is better than it really is. This means that the true, full-information demand curve is located to the _______ of the asymmetric information demand curve, and consumers will purchase ________ than what they really would have purchased.

Answer 1

Answer:

Imagine consumers are fooled into thinking that a good is better than it really is. This means that the true, full-information demand curve is located to the ___left____ of the asymmetric information demand curve, and consumers will purchase ___more_____ than what they really would have purchased.

Explanation:

The existence of asymmetric information implies that one party in a business transaction possesses information that the other party lacks. This causes the market to fail because the correct price for the product or service cannot be set based on the forces of supply and demand.  If consumers have full information, their demand curve will be skewed to the left, meaning that less of the product will be demanded.