In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold. Think about your decision to buy the textbook for this course. You paid $225 for the book, but you would have been willing to pay $500 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $70 to you. The bookstore will pay you 50% of the original $225. How much total value have you gained?

Question

Business

Bailey Ho

7 March, 23:43

In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold. Think about your decision to buy the textbook for this course. You paid $225 for the book, but you would have been willing to pay $500 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $70 to you. The bookstore will pay you 50% of the original $225. How much total value have you gained?

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Answers (1)

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Darien Barnett · Answer 1

the total surplus will be: 275 + 32.5 = 307.5

Explanation:

At purchase, the consumer surplus will be the difference between the amount willing to pay for the book and the book selling price:

500 - 225 = 275

Then, the selling surplus will be the difference between the amount you are willing to sold and the saelling price:

225 x 50% = 112.5

112.5 - 70 = 32.5

the total surplus will be: 275 + 32.5 = 307.5