The Market for Lemons car. This, in turn, motivates the owners of moderately good cars not to sell, and so on. The result is that a market in which there is asymmetric information with respect to quality shows characteristics similar to those described by Gresham's Law: the bad drives out the good. (Although Gresham's principle applies more specifically to exchange rates, modified analogies can be drawn.) Akerlof considers a situation in which demand "D" for used cars depends on the cars price "p" and quality "µ" = "µ"("p") and the supply depends on price alone. Economic equilibrium is given by "S"("p") = "D"("p","µ") and
Economic law Economic law In the legal system of the Soviet Union, economic law was the legal theory and system under which economic relations were a legal discipline independent of criminal law and civil law. In the Law of the United States and some other legal systems this approximately corresponds to the commercial law (business law). In the Soviet legal system, the purpose of the economic law is to regulate the relations arising from the economic activities. The theory of the independence of the economic law was pursued after the 21st Congress of the CPSU of 1959, with the principal proponent being