Ch 21 Attempts average and wind up with better prices Suppos

(Ch 21) Attempts average) and wind up with better prices Suppose that real estate agents earn a commission equal to 3% of the sale value of each house that they help sell. Suppose a real estate agent has If the agent sells the house now, she will earn a commission of s sell the house, the agent can earn a commission of $ keeping the house on the market By keeping the house on the market and expending more effort to for the extra effort and time of more effort and by leaving the house on the market for a few more weeks. Assume that all of the If the agent waits to sell the house, she gains s

Solution

1) Sale offer for house now = $600,000

After sometime, Sale offer for house = 4% increase in $600,000

                                                       = $624,000

Commission she will earn if the house is sold now = 3% of $600,000

                                                                                  = $18,000

Commission she will earn by selling the house after some time = 3% of 624,000

                                                                                                       = $18,720

   Agent gains = $18,720 - $18,000

                       = $720

2)

Sale offer for house now = $600,000

Sale offer for house after some time = 4% increase in $600,000

                                                    = 624,000

Gain by waiting to sell the house = $624,000 - $600,000

                                                     = $24,000

Since the amount is more than what she would gain by waiting to sell a house she does not own, the agent is more likely to keep a house on the market and expand more effort to sell a house that she owns, as opposed to one that she does not.

Explanation:

She would gain $720 extra by waiting to sell a house she does not own whereas when she owns a house then she will earn $24,000 extra.

Since she is earning more when she expand more effort to sell the house owned by her, therfore she will like to keep the more effort on the house she owns rather than the one she does not own.