Gains from Trade in a Disequilibrium Market
A new video game console is launched at a retail price of $500, but due to lower-than-expected demand, stores have an excess supply. A customer offers to buy a console for $450. The store, whose cost for the console is $400, accepts the offer. Explain why this transaction is mutually beneficial and identify the economic term for the specific type of gain each party receives by agreeing to this price.
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Sociology
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Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
The Economy 2.0 Microeconomics @ CORE Econ
Cognitive Psychology
Psychology
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A market for a specific type of winter coat is experiencing excess supply due to an unusually warm winter. The established price from the previous, colder season was $150. A potential buyer, who values the coat at a maximum of $140, approaches a seller. The seller's minimum acceptable price to cover costs for the coat is $110. Given the market condition of excess supply, which of the following outcomes demonstrates a successful negotiation where a disequilibrium rent is captured?
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Consider a market for concert tickets where a fixed number of seats are available. A popular band announces a last-minute show, and tickets are initially sold for $80 each. Demand for these tickets is extremely high, with many more people wanting to buy tickets at $80 than are available. A person who bought a ticket for $80 then sells it to another fan for $200.
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Gains from Trade in a Disequilibrium Market
In a market experiencing significant excess supply, any transaction occurring below the previous market price represents a disequilibrium rent captured solely by the buyer.
Match each market condition with the most likely outcome regarding price-making behavior and the potential for economic gains.
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In a market experiencing a significant surplus of a product, a seller whose minimum acceptable price for an item is $50 agrees to sell it to a buyer for $60, which is below the previous market price of $75. The $10 of economic gain the seller captures in this transaction (the difference between the sale price and their minimum acceptable price) is best described as a __________.
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