Final answer:
Buyers are harmed by asymmetric information in markets, as they may unknowingly purchase inferior goods, while sellers may benefit from selling lower quality products at higher prices. To improve market function, mechanisms to bridge the information gap must be employed.
Step-by-step explanation:
In a market that has unraveled due to asymmetric information, it is typically the buyers who are harmed. In such markets, sellers have more information about the quality of goods, such as gemstones, than buyers do. This imbalance of information can lead sellers to offer inferior products, while buyers may lack the confidence in the quality of goods, making them less willing to make purchases. The sellers, in this case, might be helped because they are able to sell low-quality goods at a higher price due to the buyer's lack of information.
To rectify this situation, we need mechanisms that can bridge the information gap between buyers and sellers, facilitating transactions and ensuring that the market functions efficiently. Mechanisms such as warranties, brand reputation, and independent inspections can help mitigate the effects of imperfect information and build buyer confidence.