Rough Notes : Preferences and Utility

Voluntary Exchange. If an airline mechanic gets paid $30,000 a year, it must be that the mechanic would rather have the money than the leisure time, while the airline would rather have the mechanic than have the money. Another example: apartment rentals. That is, price is bounded below by what the seller will accept: the supply price, and bounded above by what the buyer is willing to pay: the demand price. If there is any room between these (as there usually is) then either the buyer or the seller (usually both) obtain a surplus on the transaction. For example, the mechanic might have accepted a job at $25000 a year, it that was the only job available; the airline might have been willing to pay $40000 a year, if no one would work for less.