Asked by Seera Guice on Sep 23, 2024
Verified
If you are willing to purchase a house for $300,000 and you purchase the house for $275,000,this transaction will generate:
A) There is no surplus created
B) $25,000 worth of seller surplus and unknown amount of buyer surplus
C) $10,000 worth of buyer surplus and $15,000 of seller surplus
D) $25,000 worth of buyer surplus and unknown amount of seller surplus
Buyer Surplus
The difference between the buyer’s value (what he is willing to pay) and the price (what he has to pay).
Seller Surplus
The difference between price (what the seller is able to sell for) and the seller’s value (what she is willing to sell for).
- Grasp the conditions under which transactions create wealth or surplus.
Verified Answer
XJ
Xinyan Jiang6 days ago
Final Answer :
D
Explanation :
The transaction generates $25,000 worth of buyer surplus because the buyer was willing to pay $300,000 but only paid $275,000. The seller surplus is unknown without knowing the seller's minimum selling price.
Learning Objectives
- Grasp the conditions under which transactions create wealth or surplus.