Question

Suppose Elizabeth has not bought any units of the good and Corey has not sold any units of the good.

For the first unit of the good Elizabeth buys, the maximum price she would pay is dollars.

For the first unit of the good Corey sells, the minimum price he would accept is dollars.

If they exchange a single unit of the good at a price of $5, Elizabeth benefits herself dollars and Corey benefits himself dollars.

Because Elizabeth and Corey are both better off after voluntary exchange, we say the exchange was mutually beneficial, win-win in the vernacular of economics.

Answer 1

Voluntary exchange in economics benefits both buyers and sellers. Elizabeth and Corey's single unit exchange at a price of $5 is mutually beneficial. This question explores the concept of voluntary exchange and its advantages in a private market.

Step-by-step explanation:

In this scenario, the subject being discussed is voluntary exchange in economics and how it benefits both buyers and sellers. The question poses a specific scenario where Elizabeth and Corey engage in a single unit exchange of a good at a price of $5. This exchange is mutually beneficial as both Elizabeth and Corey benefit from the transaction.

The principle of voluntary exchange states that individuals engage in trade because it improves their own well-being. In this case, Elizabeth values the first unit of the good at a price less than or equal to $5, while Corey values it at a price greater than or equal to $5. Therefore, $5 is a fair and mutually beneficial price for both parties.

Overall, this question explores the concept of voluntary exchange and how it creates mutual benefits for buyers and sellers in a private market.