Question

Barbara is trying to sell her Apple computer; however, none of the potential buyers is willing to pay the price Barbara desires. Barbara's friend Zeynep, an economist, thinks this might be due to a lack of information on the part of buyers. Zeynep uses the concept of __________ to explain to Barbara why she cannot sell her computer at the price she is asking

Answer 1

Answer:

Adverse selection

Explanation:

Adverse selection occurs when buyers of a product have more information about their product than the potential buyers.

The party that has less information has a weaker position than the person with more information. This is because the buyer cannot make a good purchase decision based on all information pertaining to a product. So they will most likely end up paying a price that differs from the value of the product.

In the given scenario Barbara has more information about her Apple computer while the buyers have less information.

That is why they are not buying.

This is an example of adverse selection.

Answer 2

Answer:

adverse selection

Explanation:

In economics, adverse selection happens when potential buyers and sellers of products and services do not possess the same information about the product or service being offered or sold.

In this case, Barbara believes that she cannot get a fair price for her computer because potential buyers do not know how good her computer is. This lack of information results in an adverse selection.