Question

Your grandmother has just passed away and left you her favorite necklace. You always loved your grandmother and will miss her greatly. You want to keep the necklace as a way to remember​ her, and you would never sell the necklace for any amount of money. Use the Y​-axis on the graph to the right to demonstrate the​following: 1.) Using the line drawing​ tool, draw the supply curve for your​ grandmother's necklace. 2.) Using the point drawing​tool, determine the equilibrium price for the necklace. Label this point​ 'E'.If you are not willing to sell the necklace for any amount of​money, why is there an equilibrium price (particularly a price in thousands of​ dollars) for the​ necklace?A. The diagram is​ incorrect, because it does not adequately reveal your preferences.B. The​ necklace's price is determined by supply.​ Thus, it is a​supply-determined item.C. The equilibrium price simply reflects​ that, for this​demand-determined item, you are the highest bidder.D. The diagram reflects the fact that quantity demanded and quantity supplied are not equal.

Answer 1

Since the necklace is not for sale at any price, a traditional supply curve cannot be drawn, and an equilibrium price cannot be established. Thus, choice A is correct; the diagram does not adequately reflect the personal value placed on the necklace.

Step-by-step explanation:

Since you are not willing to sell your grandmother's necklace for any amount of money, the supply curve for the necklace in a graph would be vertical because it represents a fixed quantity of supply, which in this case is zero or near zero; you are not supplying the necklace to the market regardless of the price. Therefore, it is not possible to determine an equilibrium price for the necklace in a traditional sense. Drawing an equilibrium price (point 'E') on the graph would not make sense because it implies there could be a market transaction at that price, which contradicts the premise that the necklace is not for sale.

The correct answer to the question 'If you are not willing to sell the necklace for any amount of money, why is there an equilibrium price for the necklace?' is A: The diagram is incorrect because it does not adequately reveal your preferences. The personal value you place on the necklace creates a situation where the market price is irrelevant, which means traditional supply and demand analysis cannot be applied.

Answer 2

C. The equilibrium price simply reflects​ that, for this​demand-determined item, you are the highest bidder

Step-by-step explanation:

The equilibrium price simply reflects​ that, for this​ demand-determined item, you are the highest bidder.

The supply is nill in the market as you dont want to sell the item. So supply curve is the y axis, and the neckless has some specific demand in the market. So, price is demand determined and you are the highest bidder.