Question

Why might it be difficult for a buyer and seller to

agree on a price when imperfect information exists?

Short answer

This problem stems from ambiguity about the company's quality and production costs.

Step-by-step solution

Definition of buyer and seller.

Definition Buyer: Under a contract of sale, the party who acquires, or promises to acquire, ownership, benefit, or usage in exchange for money or other consideration. Also known as a buyer.

Seller: A seller is a party who makes, offers, or contracts to make a transaction to an actual or potential buyer.

Explanation of solution.

Incomplete information may alter the optimal pricing of buyers and sellers. However, due to incomplete information, the buyer was unable to determine quantities and was hesitant to enter the market. and the seller could not analyze the quality of goods which buyer required so cannot demonstrate the quality of goods to the buyer. Economics analyst refers to buyer and seller participating in the thin market. It means when it is difficult for buyers and sellers to participate in the market due to imperfect information then the market may become expressly thin as a only a small percentage of buyers and sellers try to provide enough information.

Thus, imperfect information might be difficult for buyers and sellers to participate in the market and agree on a price.