Question

Write an essay about asymmetric information and relate it with the impact of Covid-19 pandemic.

Marking scheme:

Introduction ( 2 marks)

Contents; 4 contents ( 16 marks)

Conclusion ( 2 marks)

Answer 1

Asymmetric information : It refers to the siyuation where incomplete information prevails in the matket. In this vase, generally one party is having the complete knowledge and the other party is having the incomplete information, which leads to the market failure.

We can more clearly understand the concept of asymmetric information with an example. Consider a market where 100 people want to sell their car and 100 people want to buy used car. Everyone in the market knows that 50% of the cars are PLUM( Good quality ) and rest 50 % of the cars are LEMON (Bad Quality). The current owner of each car has perfect information about its quality of car but Buyersare not able to ecognize which car is Plum and which car is Lemon. The owner of Lemon are willing to sell their car at INR  1000 and the owner of Plum are willing to sell their car at INR 2000. On the othet hand , Buyer is willing to pay INR 1200 for lemon and INR 2400 for Plum.

If it would be easier for the buyer to recognize the quality of the car , then there will be no problem. However the issue is that buyer cannot separate Plums from Lemons .Therefore his willingness to pay is determined by average quality which will be below a per stated example.

( 1/2*1200) + (1/2*2400) = INR 1800

But at the proces INR 1800 , the Plum owners are not ready to sell thier cars but Lemon owners are happily ready to sell out their cars. This will lead of increased quantity of cars by Lemon owners and reduced quantity of cars by Plum owners which will futher reduce the average quality of a car. Therefore, Poor quality products are forcing good quality products out of the market and creating the problem of Adverse selection., that arises mainly due to hodden information at one side.

COVID 19 PANDEMIC AND ASYMMETRIC INFORMATION

The covid 19 Pandemic which was originated from China has all spread out in corners of each and every country.The concept of Asymmetric Information can be related well with the Covid 19 Pandemic.

There is lack of and incomplete information lying at the part of general public which is increasing their sufferings and leading to large number of deaths in countries. Social Medis is one of the medium for raising Asymmetric information on the part of Covid 19 Pandemic.

At the begiining it was circulated among the general public of all countries that it is a common flu virus which is non communicable in nature. Later it was declared by WHO to maintain social distaincing as Covid 19 is a communicable disease which could even taked lives of people.People get misled by false information.Public health officials were working with incomplete information when the pandemic began, and they have updated their messaging as new insights about COVID-19 emerge.

Also later on , the Centers for Disease Control and Prevention (CDC) abruptly changed its messaging on face masks: It suddenly changed  its original recommendation that masks were not needed by the general public for guidan Pandet strongly encourages their use.

We need better guidance from the state and from the federal government as far as what we need to do to stay safe. Several local public health officials also blamed unreliable online sources. which creates the problem of Asymmetric information in th market along with fear of covid and death in people's mind.Misinformation about mask requirements has also proved to be  problematic for local officials and ultimately affects the health of all citizens of multiple countries.

In this scenario of asymmetric information , Getting people to accept the severity of the outbreak is a challenge as well. It is very important to curculate clinically proven correct information to the people from stop them to take wrong decisions which could lead to severe heath conditions.

People should be guided by the local Public officials for time to time Hand wash, use of hand sanitizers , maintaining social distancing and eating healthy food to boost immune system should be adopted to avoid and fight Covid 19 Pandemic.