Question

Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $45 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $103 .

Answer 1

Answer: The total value created from the trade is $58

Explanation: The value created by me is $25 as I sold for $70 a bicycle worth $45 to me. That is $70 - $45 = $25.

On the otherhand, my friend created a value/gain of $33. He bought the bicycle for $70 but the worth to him is $103. That is, $103 - $70 = $33

In essence, the total value created will be the summation of the value created by me and that of my friend

That is, $25 + $33 = $58