Answer
Adverse choice happens when there is uneven (inconsistent) or asymmetric data among purchasers and venders(buyer and seller ).
This inconsistent data contorts the market and leads to market failure.
For instance,
The buyer of Insurance may have preferable data over the seller.
The individuals who need to purchase the insurance are those well on the way to make a case.
In this manner, firms are hesitant to sell insurance.
Merchants of recycled products may have better data about the genuine nature of the great buyer.
Therefore, purchasers are hesitant to pay out a decent price because they fear to get a 'dud'
