Page 428 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Unit-30: Economics of Information

Notes
Fig. 30.2

w(y) ` 1,00,000 W w(y) ` 1,00,000
Group I
Group II
Wage Schedule W 2 1 ` 50,000 W 2 1 `50,000 ` 30,000
W
` 60,000

C = y/2
2

O 0.40 0.80 1.20 1.60 O 0.40 0.80 1.20 1.60
y y
Optimal Choice, y = 0 Optimal Choice, y = 0
Education Level

Give your opinion on Asymmetric Information.

Meaning

The concept of efficient market shows this is the stock share and security price which collect very fast
according to new information and reflect the complete available information of present price.
EMH is also known as efficient market by information, the decelerating of company in capital market,
reports, financial summary and for political statements, international incidents like war, crisis etc,
enters regularly, Such all information reflects in the current share pricing, For Example; in the last
month of year 2002, the Reliance Company discovered the oil is cartel area of Andhra. This information
intently reflected in the share price which was increased that day. Similarly, the doubt of gulf war has
always increased the share price of old companies across the world because the possibility of oil stock
shortage.

Its Assumptions

EMH is based on following assumptions:
1. There are many particulars in the market. They evaluate and analyse the free stock to each other.
2. The update information comes suddenly in the capital market of stock and every information is
independent to the information.
3. The participants (buyer and seller) very fast update information of the stock price.
4. Current stock price reflects the instant available information.
5. The expected returns in current price stop the risk.

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