Eleven of your friends are about to take a course, and each one is interested in

Question

Eleven of your friends are about to take a course, and each one is interested in buying one used textbook. Another 11 of your friends have already taken the course and are willing to consider selling their books. Suppose that each friend tells you his or her buyer value or seller cost. They ask you to figure out how to arrange all the trades. Because you have taken an economics course, you sort the buyer values in decreasing order so you can plot a demand curve and you sort the seller costs in increasing order so you can plot a supply curve. 1.6) Suppose that people who are indifferent about trading do, in fact, go ahead and trade. Under this convention, what is the prediction from the supply and demand model about the number of books that should change hands at the equilibrium price? A. 0 B. 5 C. 2 D. 6 E. 11

Explanation / Answer

If the valuation starts at $1, $2, and so on, the buyer with a willingness to pay $11 will be able to purchase from the seller with lowest reservation price which is $1. Then, the buyer with a willingness to pay $10 will be able to purchase from the seller with next lowest reservation price which is $2. In this manner, we match $9 with $3, $8 with $4 $7 with $5 and $6 with $6. In this manner, a total of 6 books would change hands

Option D. 6 books

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