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.

Explanation / Answer

Preparing Demand Schedule -

If the price of book is $4, then all 11 persons are willing to buy as they are ready to pay either $4 or more than this.

At price of $6, 10 persons are willing to buy as they are ready to pay either $6 or more than this.

At price of $8, 9 persons are willing to buy as they are ready to pay either $8 or more than this.

At price of $10, 8persons are willing to buy as they are ready to pay either $10 or more than this.

At price of $12, 7 persons are willing to buy as they are ready to pay either $12 or more than this.

At price of $14, 6 persons are willing to buy as they are ready to pay either $14 or more than this.

At price of $16, 5 persons are willing to buy as they are ready to pay either $16 or more than this.

At price of $18, 4 persons are willing to buy as they are ready to pay either $18 or more than this.

At price of $20, 3 persons are willing to buy as they are ready to pay either $20 or more than this.

At price of $22, 2 persons are willing to buy as they are ready to pay either $22 or more than this.

At price of $24, 1 person is willing to buy as they are ready to pay either $24 or more than this.

Demand Schedule will be as follows -

Preparing Supply Schedule -

If price is $4, only 1 person is ready to sell as all other sellers are asking for price higher than $4.

If price is $6, 2 persons are ready to sell as all other are asking for price higher than $6.

If price is $8, 3 persons are ready to sell as all other are asking for price higher than $8.

If price is $10, 4 persons are ready to sell as all other are asking for price higher than $10.

If price is $12, 5 persons are ready to sell as all other are asking for price higher than $12.

If price is $14, 6 persons are ready to sell as all other are asking for price higher than $14.

If price is $16, 7 persons are ready to sell as all other are asking for price higher than $16.

If price is $18, 8 persons are ready to sell as all other are asking for price higher than $18.

If price is $20, 9 persons are ready to sell as all other are asking for price higher than $20.

If price is $22, 10 persons are ready to sell as all other are asking for price higher than $22.

If price is $24, all 11 persons are ready to sell.

Supply Schedule will be as follows -

Quantity Supplied

Combined Schedule is as follows -

As above table shows that quantity demanded is equal to quantity supplied as price of $14.

So, equilibrium price of given book as per provided information is $14 and 6 would be the number of books that will change hands.

Price per unit Quantity demanded $4 11 6 10 8 9 10 8 12 7 14 6 16 5 18 4 20 3 22 2 24 1

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