Asymmetric information and the market's inability to achieve equity (HL)

Learning objectives

Explain how asymmetric information leads to adverse selection and moral hazard, using examples such as insurance, used cars and financial markets

Evaluate government responses to asymmetric information: legislation, regulation and provision of information

Evaluate private responses to asymmetric information: signalling and screening

Distinguish equity from equality and explain why free markets, which reward ownership of factors of production, are unlikely to produce an equitable distribution of income