Group Members:

1. Linta Siddiqui (2419-2020)

2. Jeena Kumari (1059-2020)
3. Iqra Hassan (999-2020)

Subject: Micro Economics

Semester: 2nd BBA
Instructor: Maam Seema
Date of submission: 16th-July-2021

TOPIC: Economics of Information

 What Is Economics Of Information?

Economics of information, or information economics,

belongs to the field of microeconomics and it studies the
importance of information in Economics. The
neoclassical theory was developed around the
assumptions of perfect information and the absence of
uncertainty, and although this simplification allows
modelling the reality, it is unrealistic. Economics of
information is the result of an alteration in the usual
neoclassical analysis, and it integrates the possibility of
imperfect information that will result in asymmetric
information.
Asymmetric information occurs in those situations in
which an agent has greater information, either before or
after, the interaction between agents happens. The study
of these situations is of special relevance mainly to avoid
the conflicts that will arise from them it. If an agent has
inside information previous to the economic relations, ex-
ante asymmetry, adverse selection may occur. If the
inside information is after the economic relations, post-
ante, it will be considered moral hazard.
The importance and value of information within
economics is huge. It eliminates risk and uncertainty, and
it makes it possible to take better choices that will report
higher yields. The less risk and uncertainty there is, the
higher the utility will be valued.
The study of economics of information is key for many
economic fields including game theory, agency theory or
contract theory.

The nature of information:

1. Creation created for reasons beyond the market Like
for self-expression, space between creator/consumer
disappear.

2. Intangibility Information is intangible with no set

unit of measure.

3. Heterogeneity a single kind of information can have

more than one form.

4. Time highly perishable (for example, live news).

5. Public good is not consumed by being used can be
resold given away with no reduction in its contents.

Economic roles of
information:
1. A Substitute for physical entities:
 Telecommuting replaces the movement of
people
 Exploration through imaging replaces
exploration through surgery.
2. Used for influence:
 Influence, persuade
 Advertising serves buyers & sellers about
products.
3. Essential in education:
 Serving the process of learning
 Supplement teacher by providing material
4. A substance of cultural enrichment:
 People are willing to pay for it, which is the
basis for the entertainment industries.
 5. As a product:
 produced as a package.
 Can be a service
 Can be a capital resource

MacroEconomic of
information:
The macroeconomics of information
 The branch of economics that deals with a nation’s
total economic behavior.
Role of information in national economies
 in the distribution of the workforce among various
types of activities and functions.
 It also relates to effects on national economic
policies.
Background
Mark Uri Porta (He is best known for his doctoral work
in which he created measures of the information
economy). In 1977, added information sector in national
economies,
• Agriculture
• industry
• services
Four categories of information functions:
1. Management functions
2. Support functions (primarily clerical in nature)
3. Equipment functions (hardware and software)
4. Substantive functions (involved in the production and
distribution of information)

MacroEconomic of
information
(Cost Of Information)
 Information must be created, by generation and
processing of data; these are authoring functions.

 It must be assessed for publish ability; these are

editorial functions.
 It must be processed for the generation of a master;
these are composition functions.

 Products and/or services will be produced.

 The products and services will be marketed.

 They will be distributed.

Economics characterstics
of information:
1 The value of information is not quantifiable, its value
depends on “context and use”

2 There is a great deal of difference between personal

and group or organizational use of information. The
division of information gathering may well be the
most fundamental form of the division of labor.
3 The cost of producing information is independent of
the scale on which it is used.

4 Economics characteristics of information

5 Learning takes time so that there is a limit to the rate

at which decision makers can absorb information.

6 There are usually significant information differentials

in terms of possession of information, access to
information and capacity to use information.

7 The greater part of the cost of information is often the

cost incurred by the recipient.

8 The output of the information sector is used to a

significant extent by industry as opposed to
consumers.

9 The complexity of information activities makes

information as a resource difficult to contain within
the traditional production function mode of analysis.
 We have a short quiz for economics

1. _____ is the study of business and consumers, while

_____ is the study of the economy as a whole.

Options:
 Macroeconomics; microeconomics
 Microeconomics; inflation
 Consumer economics; macroeconomics
 Microeconomics; macroeconomics

2. As Rosa considers where to build her new bakery,

she also factors in the number of other bake shops in
the area. If she builds in an area where she is one of
many bakeries, she will be forced to charge lower
prices in order to compete with the other bakeries
 already in the neighborhood. This is an example of
which economic theory?
Options:
 The law of macroeconomics
 The law of supply and demand
 The law of consumer behavior
 The law of microeconomics

3. What is economics?
Options:
 The study of a government's distribution of resources
 The study of consumers' spending habits
 The study of buying and selling in the stock market
 The study of a society's allocation of resources

4. Which of the following is a good?

Options:
 an apple
 dance lessons
 a tutoring session
 a massage therapy session
THANK
YOU