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Unformatted text preview: ndent of his own
views or preferences, the value of the silver to the jeweller is $5000.
Note that the jeweller can both buy and sell silver at its current market price. His
personal preferences or use for the silver and his opinion of the fair price are therefore
irrelevant in evaluating the value of this opportunity. This observation highlights an
important general principle related to goods trading in a competitive market, a market
in which a good can be bought and sold at the same price. Whenever a good trades in a
competitive market, that price determines the value of the good. This point is one of the
central and most powerful ideas in finance. It will underlie almost every concept that we
develop throughout the text. Problem
You have just won a radio contest and are disappointed to find out that the prize is four tickets to the Celine Dion concert (face value $80 each). Not being a fan of Celine (as you were
traumatized by having to watch the movie Titanic several times when you were younger), you
have no intention of going to the show. However, it turns out that there...
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- Spring '07