Question: Using Exercise, sketch the effects in parts (a) and (b) on a single supply and demand diagram. What prediction would you make about how the improved information alters the equilibrium quantity and price?
Exercise: A website offers a place for people to buy and sell emeralds, but information about emeralds can be quite imperfect. The website then enacts a rule that all sellers in the market must pay for two independent examinations of their emerald, which are available to the customer for inspection.
a. How would you expect this improved information to affect demand for emeralds on this website?
b. How would you expect this improved information to affect the quantity of high-quality emeralds sold on the website?