Can information asymmetry be used for demand and supply appl

Can information asymmetry be used for demand and supply applications?

Solution

Meaning of asymmetric information: Asymmetric information refers to the situation where information is not equally distributed between the parties involved in economic transactions. One party has relatively more and accurate information. Thus, it can be used for disadvantage of other party. Asymmetric information, Demand and supply: asymmetric information renders the economic system inefficient and economy moves towards the inefficient outcomes. While the demand and supply seek to achieve the economic efficiency by producing optimal output. Hence, presence of asymmetric information would not help to reach the efficient outcome.