Suppose you decided to follow in Vernon Smith’s footsteps and conducted your own experiment with your friends. You give out 10 cards, 5 cards to buyers with the figures for willingness to pay of $1, $2, $3, $4, and $5, and 5 cards to sellers with the amounts for costs of $1, $2, $3, $4, and $5. The rules are the same as Vernon Smith implemented.
a. Draw the supply and demand curves for this market. At a price of $3.50 how many units are demanded? And supplied?
b. Assuming the market works as predicted, and the market moves to equilibrium, will the buyer who values the good at $1 be able to purchase? Why or why not?