Question

16. How prices allocate resources Suppose that there are three beachfront parcels of land available for sale in Asilomar 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 $400,000. The following table states each person's willingness and ability to purchase a parcel. Person Antonio Caroline Willingness and Ability to Purchase (Dollars) 550,000 480,000 420,000 380,000 340,000 330,000 Dmitri Frances Jake Latasha Which of these people will buy one of the three beachfront parcels? Check all that apply. Antonio Caroline Dmitri Frances

Answer 1

Minimum selling price of each parcel is $400000.

People will buy the beachfront parcel if the people willingness and ability to purchase is higher than minimum selling price i.e., $400000.

Hence following people will buy one of the three beachfront parcels:

Antonio.

Caroline

Dmitri

Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical parcel becomes available for sale at a minimum price of $360000. This fourth parcel will be sold, because Frances will purchase it from the seller for at least the minimum price.

Note: Frances willingness and ability to purchase is $380000 which is higher than the minimum price of fourth parcel i.e., $360000.