In currency valuation, Gresham's Law states that if a new coin ("bad money") is assigned the same face value as an older coin containing a higher amount of precious metal ("good money"), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.
Coins
were first made with gold, silver and other precious metals, which gave them
their value. Over time, the amount of precious metals used to make the coin
decreased because the metals were worth more on their own than when minted into
the coin itself. If the value of the metal in the old coins was higher than the
coin's face value, people would melt the coins down and sell the metal.
Similarly, if a low quality good is passed off as a high quality good, then the
market will drive down prices because consumers won't be able to determine the
good's real value.