For each of the following purchases, say whether you would expect the dogma of imperfect information to be relatively high or relatively low:
- Buying apples at a roadside stand
- Buying dinner at the neighborhood restaurant around the comer
- Buying a used laptop computer at a garage sale
- Ordering flowers over the internet for your friend in a different city
(a)
Whether the degree of imperfect information is high or low in case of buying apples at a roadside stand is to be determined.
Answer to Problem 1SCQ
The degree of imperfect information is relatively low.
Explanation of Solution
In the situation where the buyer is buying apples at a roadside stand: Here, buyer can see the apples and make the decision according, so, here the degree of imperfect information is relatively low.
Imperfect information appears in a situation where buyers and sellers, entered into a transaction, have different information and have to make decisions on the basis of incomplete information.
(b)
Whether the degree of imperfect information is high or low in case of buying dinner at the neighborhood restaurant around the corner is to be determined.
Answer to Problem 1SCQ
The degree of imperfect information is relatively low.
Explanation of Solution
In the situation where the buyer is buying dinner at the neighbourhood restaurant around the corner: The degree of imperfect information is relatively low as the neighbourhood restaurant around the corner may have some reputation.
Imperfect information appears in a situation where buyers and sellers, entered into a transaction, have different information and have to make decisions on the basis of incomplete information.
(c)
Whether the degree of imperfect information is high or low in case of buying a used laptop at a garage sale is to be determined.
Answer to Problem 1SCQ
The degree of imperfect information is relatively high.
Explanation of Solution
In the situation where the buyer is buying a used laptop computer at a garage sale: The degree of imperfect information is relatively high as the condition of used laptop computer and the reason behind selling it will be unknown to the buyer.
Imperfect information appears in a situation where buyers and sellers, entered into a transaction, have different information and have to make decisions on the basis of incomplete information.
(d)
Whether the degree of imperfect information is high or low in case of ordering flowers over the internet for a friend living in some other city is to be determined.
Answer to Problem 1SCQ
The degree of imperfect information is relatively high.
Explanation of Solution
In the situation where the buyer is ordering flowers over the internet for your friend in a different city: The degree of imperfect information is relatively high because we will not know how the flowers look like.
Imperfect information appears in a situation where buyers and sellers, entered into a transaction, have different information and have to make decisions on the basis of incomplete information.
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