12. Suppose that there are three beachfront parcels of land available for sale i
ID: 1133739 • Letter: 1
Question
12.
Suppose that there are three beachfront parcels of land available for sale in Astoria and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $445,000. The following table states each person's willingness and ability to purchase a parcel.
Willingness and Ability to Purchase
(Dollars)
Clancy
600,000
Eileen
510,000
Hubert
470,000
Kate
420,000
Manuel
390,000
Poornima
380,000
Which of these people will buy one of the three beachfront parcels? Check all that apply.
Clancy
Eileen
Hubert
Kate
Manuel
Poornima
Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $432,500. This fourth parcel (Will/Will not) be sold, because (prronimina, no one, Manuel, Kate) will purchase it from the seller for at least the minimum price.
Willingness and Ability to Purchase
(Dollars)
Clancy
600,000
Eileen
510,000
Hubert
470,000
Kate
420,000
Manuel
390,000
Poornima
380,000
Explanation / Answer
Answer
Among them those individuals will buy beachfront Parcels for whom Willingness and ability to pay is greater than Selling Price. Now Selling Price = 445000, Among Six of them, only Clancy( willingness to pay = 600000), Eileen (willingness to pay = 510000) and Hubert( willingness to pay = 470000) has there willingness and ability to Pay Greater than selling Price. Hence Clancy, Eileen and Hubert will buy one of the three beachfront parcels.
After three beachfront parcel is sold Selling Price falls. Now If selling Price reduced to 432500. Then Fourth parcel will not be sold because Willingness and Ability to pay for all(Kate, Manuel and Poornima) remaning, is lesser than New Selling Price.
Hence, This fourth parcel Will not be sold, because No one will purchase it from the seller for at least the minimum price.
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