"Lemons" in Used Car Market
- M; |! l& ^( V6 V4 G% `( o 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. ! U! P5 X* R3 s+ q2 d' i
1993 Ford Ranger, bilk, 4WD, a/cAM/FM/cass., showroom condition. 4 X6 C9 u! s; ]% F
Call 555-1234 after 5 p.m.
+ K. O/ S1 W* y 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 $2,000 lower than the price for this model with this equipment listed in a used car guidebook. Instead of being ecstatic, however, you are suspicious.
: m; }4 i: ?' C' Z! F For many products, when you must pay less than the going rate, you believe you are getting a great deal. This is not necessarily the case for used cars or other durable goods(washing machines and television sets, for example) because with expensive products-or, what is essentially the same thing, products with high replacement costs-you must be particularly careful about getting a "lemon." Or a product of substandard quality.
0 B4 W/ @8 u8 F0 H" V0 T In addition to asking the price, the age of a car-or any other consumer durable-is a factor when you are trying to determine whether a seller is attempting to unload a lemon. While people have all sorts of reasons for wanting to sell their cars-even relatively new cars-most people hold off until they have put many thousands of miles on a car or until the used car is several years old. You would probably be as suspicious of a car that is "too new" as you would a car that is "too good” a deal. In fact, you are probably willing to pay a high price for a high-quality used car. While this price would certainly be acceptable to the seller, the competitive market might not facilitate such trades.
) [$ b# o) S' I0 ]+ {9 M 1. The beginning of this passage assumes that college students
6 C9 U& i# T$ W1 V A) Are very clever but not very rich.
3 I! c6 {# }8 `* @8 R" w" B B) Are very capable but not very diligent.
8 S0 a G. _3 d5 M! z. w C) Have limited material resources % D# \: P* p5 }; ^; R
D) Are not rich. |