Jim values his car at $2,000, and Kelly values it at $5,000 . Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000 . Is value destroyed? Why or why not?
Value can be created in this situation. Jim can sell the car at more than $2,000, and Kelly can buy it at $5,000 or less. For example, suppose the car sells for $3,000 . Jim has given up a good worth $2,000 to him in exchange for $3,000 . He is better off by $1,000, a value created by the exchange. Similarly, Kelly is $2,000 better off because she has something that is worth $5,000 to her, and she only had to relinquish $3,000 to acquire it. If Jim refuses to sell the car, no value will be created, but none will be destroyed either. While a possible gain is forgone, no one is made any worse off by a transaction not taking place.
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