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 $595,000. The following table states each person's willingness and ability to purchase a parcel. Person Willingness and Ability to Purchase (Dollars) Alex 750,000 Becky 660,000 Clancy 620,000 Eileen 570,000 Hubert 540,000 Kate 530,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. Alex Becky Clancy Eileen Hubert Kate 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 $582,500. This fourth parcel be sold, because will purchase it from the seller for at least the minimum price.

Answer 1

16.

person's Name	minimum price of parcels ($)	person's willingness and ability to purchase a parcel ($)	Purchasing Decision
Alex	595,000	750,000 (>595,000)	Will Buy
Becky	595,000	660,000 (>595,000)	Will Buy
Clancy	595,000	620,000 (>595,000)	Will Buy
Eileen	595,000	570,000 (<595,000)	Will Not Buy
Hubert	595,000	540,000 (<595,000)	Will Not Buy
Kate	595,000	530,000 (<595,000)	Will Not Buy

Now,if 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 $582,500. As we know Alex, Becky and Clancy already have a parcel. So, they will not buy again. As far as Eileen, Hubert and Kate is concerned they will also not buy because still their willingness and ability to purchase a parcel is lower than new minimum price of parcels $582,500.

(i.e)

Eileen willingness and ability to purchase a parcel $570,000 (<$582,500),

Hubert willingness and ability to purchase a parcel 540,000 (<$582,500), and

Kate willingness and ability to purchase a parcel 530,000 (<$582,500).