This table repeats the buyer values and seller costs. In a market with no restri

Question

This table repeats the buyer values and seller costs. In a market with no restrictions on prices, the total gain captured by buyers and sellers will be $66, with $33 in gain for sellers and $33 in gain for buyers. (You can calculate these values by figuring out who trades at the equilibrium price and calculating how much gain each of them captures.) With a price ceiling of $8.50, fewer trades will take place. The total gain for buyers and sellers will be lower, although as you will see, it is uncertain exactly how much lower. These problems show you why the gain is uncertain. They also encourage you to think about the following question: Who wins and who loses when there is a price ceiling? If you were representing the interests of all buyers, would you be in favor of a price ceiling? Now suppose that the buyers with the lowest buyer values (buyers 5 through 12) are the ones who buy the eight books that sellers are willing to sell. (When there is a shortage, you can't say which buyers will get a book.) Calculate the total gain captured by buyers if buyers 5 through 12 are the ones who buy from the 8 sellers. This total is: $28.00 $24.00 $26.00 $25.00 $27.00

Explanation / Answer

The total gain by buyers 5-12 is -$8.50 (the price) * 8 (the number of buyers) = -$68 Then add the value of the item for the final 8 buyers, and you get -$68 + $13.50 + $13 + $12.50 + $12 + $11 + $10.50 + $10 + $9.50 = $24

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.