Interests Rates Coursework Example | Topics and Well Written Essays - 500 words

Interests Rates - Coursework ExampleAkerlofs experience during his writings on Lemons problem and its effect on the proficient functioning of a marketplace is best summarized by stating that markets are characterized by asymmetric development, and thus there is a need for adjusting the markets interests rates for individual market participants, which necessitates the better-informed participants to leave costly actions in an effort to develop market outcome by transmitting credible information to the poorly informed. According to Akerlof, most sellers are likely to lower the quality of a product in situations where the buyer cannot exactly determine or observe the product quality. He adds prices are likely to line because of the unwillingness of the buyers to pay because of skimped quality. This leads a much lower quality because sellers maximize every opportunity to ground more prices at the lower prices offered by buyers. This leads to market failure because sellers would sel l a high-quality product at high prices despite the fact that buyers are willing to pay for the high prices.Akerlof uses examples of second-hand gondolas to enhance his theory of market equilibrium. The categories the cars into two Lemons and Plums. The lemon represents a bad car, a car that is of poor quality and buyers should avoid buy lemons in the market according to Akerlof. He uses plum to mean a good quality car and most buyers would prefer to buy a plum. This situation occurs because people will not easily keep in line the quality of a product.