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

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.

jaquelinefvr jaquelinefvr · Answer 2 · 2021-10-26T15:26:40+02:00

Economist Zeynep uses the concept of adverse selection to explain to Barbara why she can't sell her computer at the price she's asking. This is a market situation where the seller has more information about the product.

In other words, in adverse selection, potential buyers do not have enough information to understand why the Apple computer Barbara is trying to sell may have a higher price compared to other available brands.

Therefore, the potential buyer is in an unfavorable situation for having less information about a business, since in a market economy prices are able to convey more information.

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