Ace your econs - Jeffrey Teo (JC economics)

Bachelor of Arts in Economics (2nd upper)

A-Level Economics Content Series - Asymmetric Information (H2)

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In this course, we will be going through asymmetric information. We will be distinguishing adverse selection and moral hazard with various examples with a sample practice question right at the end. Do note that principal agent problem & supply induced demand is only applicable for Victoria JC's students.

This course includes:
 8 Lesson Video
 0 Assignments

Lesson 1 – Categorizing information failure

In this lesson, I will explain what is information failure. Basically, I will explain the 2 types of information failure.

Lesson 2 - Recap on imperfect information

In this lesson, I will recap the concepts of merit and demerit goods. I will discuss about 6 steps of framework to answer underestimation of true benefits or cost when consuming goods.

Lesson 3 - Adverse selection and examples

In this lesson, I will define Adverse selection and provide examples to illustrate adverse selection. Through the example, I will demonstrate the dynamics of adverse selection which could be a result from seller obtaining more information as well as from buyer. I will highlight the keywords to be used in answering questions related to adverse selection.

Lesson 4 - Moral hazard and examples

In this lesson, I will define Moral hazard and contrast it against Adverse selection. Through examples, I will demonstrate how moral hazard is displayed in day to day activities. I will explain the Principal-Agent (PA) problem.

Lesson 5 - Brief outline of selected question and Answer breakdown

In this lesson, we will discuss the following question “Explain why private decision-making in an environment with different types of information failure leads to inefficient working of the price mechanism.” This is Part A of a set of question. You may download the question here : I will demonstrate the 4 steps to answering this question.

Lesson 6 – U.S.S.R. (Solutions for adverse selection)

In this lesson, I will introduce the acronym U.S.S.R. – Universal Coverage, Signaling, Screen and Regulation (aka Lemon Law), which is the solutions for adverse selection. I will use examples to show how the solution works.

Lesson 7 – Moral Hazard Solutions

In this lesson, I will discuss the 2 solutions for moral hazard – Co-Payment and Monitoring. I explain how co-payment and monitoring reduce moral hazard issue through examples.

Lesson 8 – Written Activity

In this last lesson, we will discuss the following question “Discuss the policies that a government could adopt to address these causes of the inefficient working of the price mechanism.” This is the Part B of the question from Lesson 5. You can download the question here :