lemons, which delivers a low market price. At this low market price, good cars are worth more to their owners than they would get from selling them, so no good cars are offered for sale: only lemons are available. So lemons are the only cars traded.

Figure 12.3 illustrates the used-car market that we’ve just described.

The demand for used cars, D, is equal to the demand for lemons, D . The supply of used cars, S, is the supply of lemons up to $12,000 a car (the green segment of the supply curve) and the supply of lemons plus the supply of good cars at prices above $12,000 (the blue segment of the supply curve).

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L