1. For each of the following purchases, say whether you would expect the degree

Question

1. For each of the following purchases, say whether you would expect the degree of imperfect information to be relatively high or relatively low: a. Buying apples at a roadside stand b. Buying dinner at the neighborhood restaurant around the corner c. Buying a used laptop computer at a garage sale d. Ordering flowers over the Internet for your friend in a different city

2. Why is there asymmetric information in the labor market? What signals can an employer look for that might indicate the traits they are seeking in a new employee?

3. Why is it difficult to measure health outcomes?

Explanation / Answer

1) a) Buying apples at a road side : The degree of imperfect information is relatively low because there are other vendors who are usually standing besides each vendor, therefore when I would buy apples, I can explore the different rates that are offered by the vendor (the only assumption to be paid is there is no pre decided price among all)

b) Buying at the neigbhourhood restaurant around the corner ---relatively high imperfect information (assuming not many

c) Buying a used laptop compter at a garage sale ---relatively high imperfect information because there is not much scope to check out the prices of laptop.

d) Ordering flowers over the internet for your friend in a different city implies relatively less elastic because one can check the prices over the internet of various vendors

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