Suppose that people who are indifferent about trading do, in fact, go ahead and trade. Under this convention, what is the prediction from the supply and demand model about the number of books that should change hands at the equilibrium price?

A. 11

B. 5

C. 0

D. 6

E. 2

Suppose now that the professor teaching the course announces that a large part of the class grade will depend on problem sets from the textbook. This makes owning a copy of the textbook more valuable to each of the potential buyers. The buyer value (or willingness to pay) increases for each student planning to take the course. Seller costs stay the same.

6. If you set a price of $18 per book, how many buyers now want to buy a book? (Follow the usual convention that if people are indifferent they go ahead and trade.)

A. 7

B. 4

C. 9

D. 6

E. 3

F. 5

G. 8

7. With these new buyer values, if you set a price of $18 per book:

A. There will be a surplus of books.

B. There will be a shortage of books.

C. The market will be clear

8. For these buyer values and seller costs, the supply and demand model predicts that the price will be:

A. $24

B. $12

C. $18

D. $32

E. $4

9. Suppose that people who are indifferent about trading do in fact go ahead and trade. Under this convention what is the prediction from the supply and demand model about the number of books that should change hands?

A. 9

B. 0

C. 7

D. 8

10. Note from the table that when the professor announced that the textbook would be required, the buyer value for each of the buyers increased by $8. According to the model of supply and demand, which statement best describes what happened to the equilibrium price and the reason why?

A. The price does not increase. Buyers will refuse to pay more because costs have not changed.

B. The price increases by $8 because the books are worth $8 more to each of the buyers, and competition between the buyers drives the price up by the full amount.

C. The price goes up by $4 because this reduces the quantity of books that sellers want to sell from 6 at $14 to 8 at $18.

D. The price goes up by $4 because it is fair for the buyers and sellers to share equally the effects of this new information.

E. The price does not increase. The seller costs are the same. As a result, competition between the sellers keeps the price at the same level as before.

F. The price increases by $8 because this is the change in price necessary to reduce the number of books that buyers want to buy 8, the number that sellers want to sell.
 

Buyer Charles Anand Sam Mica Todd Mark Peter Sven Amy Jordan Kerri Buyer Value $32 $30 $28 $26 $24 $22 $20 $18 $16 $14 $12 Seller Stuart Loela Cheryl Lucy Christine Mary Saul Rajeev Jessica Ramin 300 Seller Cost $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24