"Lemons" in Used Car Market . r, N5 G$ b+ F. a1 T: u& t' X
Suppose that you, a college student of somewhat limited means, are in the market for a used pickup truck. The following ad in a local used car publication catches your eyes. , M; K: Y3 I' t! e+ U" R: j- k& N
1993 Ford Ranger, bilk, 4WD, a/cAM/FM/cass., showroom condition.
u. a; C8 P, }. A; H5 [+ C Call 555-1234 after 5 p.m. $ c3 S; g9 L) K/ B
This is exactly the kind of vehicle you want, so you call to inquire about the price. The price you are quoted over the phone is $2,000 lower than the price for this model with this equipment listed in a used car guidebook. Instead of being ecstatic, however, you are suspicious. 6 z& G0 c2 {4 ?7 E" m( {( ~7 ]7 g
For many products, when you must pay less than the going rate, you believe you are getting a great deal. This is not necessarily the case for used cars or other durable goods(washing machines and television sets, for example) because with expensive products-or, what is essentially the same thing, products with high replacement costs-you must be particularly careful about getting a "lemon." Or a product of substandard quality. - g3 D, a# n u7 Y. c$ \0 U
In addition to asking the price, the age of a car-or any other consumer durable-is a factor when you are trying to determine whether a seller is attempting to unload a lemon. While people have all sorts of reasons for wanting to sell their cars-even relatively new cars-most people hold off until they have put many thousands of miles on a car or until the used car is several years old. You would probably be as suspicious of a car that is "too new" as you would a car that is "too good” a deal. In fact, you are probably willing to pay a high price for a high-quality used car. While this price would certainly be acceptable to the seller, the competitive market might not facilitate such trades. . V8 e+ C& J/ j8 W7 L. C8 u: h! M3 D7 C
1. The beginning of this passage assumes that college students . `" a/ K1 k- b) l
A) Are very clever but not very rich. 2 f- ?. A8 w# ?6 o- \1 c8 Q
B) Are very capable but not very diligent.
# h% N% }6 Y, ]1 V. ?' Q9 \5 ~ C) Have limited material resources * _7 D! Q/ K" B& ~( H7 p% X
D) Are not rich. |