Suppose, I am a seller. I have to sell my paintings so I am
decided to organise an auction. Samaira, Sameer,Arvind,Manish and Raju wants to
buy my paintings. Definitely there is a limit to the amount that each is
willing to pay for it. The maximum price each of five possible buyers would
pay, each buyer’s maximum is his willingness to pay.
Buyer
Wilingness to Pay
Samaira Rs.100000
Sameer
Rs.80000
Arvind
Rs.70000
Manish
Rs.60000
Raju
Rs.50000
Here we can see that samiara’s willingness to pay is maximum
that is Rs.100000 and Sameer’s has Rs.80000,Arvind’s has Rs.70000,Manish’s has
Rs.60000 and Raju’s has Rs.50000.It measures how much that buyer values the
Good.Each buyer would be eager to buy the paintings at a price less than his
willingness to pay. At a price equal to his willingness to pay.if the price is
exactly the same as the value he want to give on the Paintings,he would be happy
about his buying.
To sell my Paintings , I begin the bidding from low price
just like RS.10000. Because all of them are unwilling to pay much more, the price
rises quickly. The bidding stops when samaira bids Rs.85000. At this
point,Sameer,Arvind,manish and Raju are dropped out because they are unwilling
to bid more than Rs.80000. So samaira pays me Rs.85000 and gets the paintings.
Here we have seen that samaira has given values most highly.
What is the benefit of samaira?
Samaira has a real
bargain because she is willing to pay Rs.100000 but she got my paintings at
Rs.85000 only. Here she has saved her money about Rs.15000 and it is samair’s
surplus.
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