Question

In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold.
Think about your decision to buy the textbook for this course. You paid $200 for the book, but you would have been willing to pay $450 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $50 to you. The bookstore will pay you 50% of the original $200.

How much total value have you gained?

Answer 1

Answer:

$300

Explanation:

The total value gained V is given by sum of the value gained when buying the book (B) added to the value gained when selling the book (S).

The value gained at purchase is given by the difference between the willingness to pay and the actual amount paid:

$B=\ 450 -\ 200\\B= \ 250$

The value gained when selling the book is given by the difference between the amount received from selling and the value of keeping the book:

$S= 0.5*\ 200 - \ 50\\S=\ 50$

The total value gained is:

$V= B+S\\V=\ 250+\ 50\\V=\ 300$

You have gained $300 in total value.