Using Exercise 16.20, sketch the effects in parts (a) and (b) on a single supply and demand
Question:
Using Exercise 16.20, sketch the effects in parts (a) and (b) on a single supply and demand diagram. What prediction would you make about how the improved information alters the equilibrium quantity and price?
Exercise 16.20
A website offers a place for people to buy and sell emeralds, but information about emeralds can be quite imperfect. The website then enacts a rule that all sellers in the market must pay for two independent examinations of their emerald, which are available to the customer for inspection.
a. How would you expect this improved information to affect demand for emeralds on this website?
b. How would you expect this improved information to affect the quantity of high-quality emeralds sold on the website?
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Answer Explanation a The improved information from the independent examinations is likely to increase the demand for emeralds on this website in a few ways Reduced Risk Emeralds are precious gemstones ...View the full answer
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