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ADVERSE SELECTION: When a negotiation between two people with different amounts of information, that is, asymmetric information, restricts the quality of the good traded. This typically happens because the person with more information is able to negotiate a favorable exchange. This is frequently referred to as the "market for lemons."
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GAINS FROM TRADE The combination of consumer surplus and producer surplus obtained by buyers and sellers when engaging in a market exchange. Gains from trade arise because buyers are typically willing and able to pay a higher price to purchase a good than what they end up paying and because sellers are typically willing and able to accept a lower price to sell a good than what they end up receiving. Both sides of the market exchange are thus better off, have a net gain in welfare, by making the trade. While all types of market exchanges generate gains from trade, this topic is perhaps most important for an understanding of international trade.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time searching the newspaper want ads seeking to buy either a pair of leather sandals that won't cause blisters or clothing for your kitty cats. Be on the lookout for letters from the Internal Revenue Service.
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This isn't me! What am I?
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Ragnar Frisch and Jan Tinbergen were the 1st Nobel Prize winners in Economics in 1969.
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"The will to win is important, but the will to prepare is vital. " -- Joe Paterno, football coach
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ABA
American Bankers Association, Associate in Business Administration
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