Answer to Question #199938 in Macroeconomics for snehal

Question

Jason is travelling to Europe for vacation and is seated in a​ first-class airline seat holding his infant daughter in his arms. He values being in first-class instead of coach at ​$350.

​Samantha, a CEO of a major multinational​ corporation, is sitting in the adjacent seat and is considering offering to pay Jason to move to one of the empty seats in coach.

Samantha values quiet at ​$300.

N  Aaron and Samantha (answer A ou B) reach a mutually agreeable price for Aaron to move to coach.

Answer 1

a) Samantha values the first class seat worth $300 and this implies, if he has one, he would need any amount more than $300 to quiet and occupy a seat in coach. Since the CEO is paying $600 and would not pay more than $600, ($600 > $300,Samantha will accept the deal and will quiet the seat. The range of negotiation is a price between $600 and $300.