What is meant by imperfect information? What will be an ideal ...

[swpotter12]

What is meant by imperfect information?
 
  What will be an ideal response?

Question 2

Explain how the market for gasoline would react to this price ceiling if a global shortage of oil sent the equilibrium price of gasoline to 3.50 a gal-lon. Would the U.S. gasoline market be efficient?
 
  What will be an ideal response?

[peter]

Answer to Question 1

Imperfect information is the absence of full knowledge regarding product characteristics, available prices, and so forth.

Answer to Question 2

If the equilibrium price of gasoline is 3.50 a gallon, then a price ceiling of 3.00 a gallon results in a shortage. The quantity of gasoline demanded at 3.00 a gallon exceeds the quantity supplied. A black market is likely to develop, in which consumers buy gasoline at prices higher than the price ceiling. In addition, a great deal of additional search activity arises as drivers look for gas stations that are open and willing to sell gasoline. The market is inefficient because the marginal benefit of a gallon of gasoline exceeds the marginal cost and so there is a deadweight loss.