Question

Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $32 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $104 .

Answer 1

Total value created = $72

Step-by-step explanation:

How much total value was created from this trade?

Total value created = Consumer surplus + Producer surplus

Total value created = ($104 - $70) + ($70 - $32)

Total value created = $34 + $38

Total value created = $72