Market for Lemons

The "Market for Lemons" is a concept in economics that explains how the quality of goods traded can decline when buyers can't accurately assess their true value. In used car markets, for example, sellers often have better information about a car’s condition than buyers. If buyers suspect that many cars are of poor quality ("lemons"), they may only be willing to pay a lower price. This can lead to good-quality cars leaving the market, ultimately reducing overall quality and trust. The theory highlights how information asymmetry can negatively impact markets and efficiency.