1. Price as a rationing device
Suppose that there are three beachfront parcels of land available for sale in Huntington, and six people who would each
... [Show More] like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $575,000. The following table states each person's willingness and ability to purchase a parcel.
Willingness and Ability to Purchase
(Dollars)
Brian 750,000
Crystal 660,000
Edison 600,000
Hilary 550,000
Kevin 520,000
Maria 510,000
Which of these people will buy one of the three beachfront parcels? Check all that apply.
Brian
Crystal
Edison
Hilary
Kevin
Maria
Points:
1 / 1
Close Explanation
Explanation:
Brian, Crystal, and Edison will purchase the parcels because they are the only ones willing and able to meet the minimum selling price of $575,000. One or more of the other three people might have the ability but not the willingness to pay the required price. Moreover, perhaps Hilary, Kevin, and Maria have a strong desire to own beachfront land in Huntington, but they do not have the ability to pay the selling price.
Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $535,000. This fourth parcel will
be sold because Hilary
will purchase it from the seller for at least the minimum price.
Points:
1 / 1
Close Explanation
Explanation:
To determine what will happen with the fourth parcel, compare the minimum selling price with the willingness and ability to pay of the remaining buyers. The remaining buyer with the highest willingness and ability to pay is Hilary at $550,000. Since $550,000 is greater than the minimum selling price of $535,000 for this parcel, Hilary will purchase the parcel.
1. Price as a rationing device
Suppose that there are three beachfront parcels of land available for sale in Huntington, and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $745,000. The following table states each person's willingness and ability to purchase a parcel.
Willingness and Ability to Purchase
(Dollars)
Felix 900,000
Janet 810,000
Larry 770,000
Megan 720,000
Raphael 690,000
Susan 680,000
Which of these people will buy one of the three beachfront parcels? Check all that apply.
Felix
Janet
Larry
Megan
Raphael
Susan
Points:
1 / 1
Close Explanation
Explanation:
Felix, Janet, and Larry will purchase the parcels because they are the only ones willing and able to meet the minimum selling price of $745,000. One or more of the other three people might have the ability but not the willingness to pay the required price. Moreover, perhaps Megan, Raphael, and Susan have a strong desire to own beachfront land in Huntington, but they do not have the ability to pay the selling price.
Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $732,500. This fourth parcel will not
be sold because no one
will purchase it from the seller for at least the minimum price.
Points:
1 / 1
Close Explanation
Explanation:
To determine what will happen with the fourth parcel, compare the minimum selling price with the willingness and ability to pay of the remaining buyers. The remaining buyer with the highest willingness and ability to pay is Megan at $720,000. However, since $720,000 is less than the minimum selling price of $732,500 for this parcel, no one will purchase the parcel. The seller will have to lower his minimum selling price if he wants to find a buyer. [Show Less]