1. Consider the market for yachts. The market price of each yacht is $225,000, a
ID: 1147142 • Letter: 1
Question
1. Consider the market for yachts. The market price of each yacht is $225,000, and each buyer demands no more than one yacht.
Suppose that Rajiv is the only consumer in the yacht market. His willingness to pay for a yacht is $450,000. Based on Rajiv's willingness to pay, the following graph shows his demand curve for yachts.
2.
Suppose Yakov is willing to pay a total of $150,000 for a yacht.
True or False: Keeping his maximum willingness to pay for a yacht in mind, Yakov will buy the yacht because it would be worth more to him than its market price of $225,000.
Explanation / Answer
Answer 1) Rajiv will buy the yacht because he will ge a consumer surplus of 450-225 = 225 from buying the yacht
Answer 2) Yakov will not be able to buy the yacht. He does not have the purcasing power to do so.
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