In Chapter 1 you learned that buying and selling textbooks a

In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold. Think about your decision to buy the textbook for this course. You paid $225 for the book, but you would have been willing to pay $500 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $70 to you. The bookstore will pay you 50% of the original $225. How much total value have you gained? $155

Solution

Ssolution: $318

Working:

Willing to pay	500
Actual amount paid	-225
Gain	275
salvage value gain	43
Higher of the two 70 or 225/2 = 112.5
	318