Question: your grandmother has just passed away and left you her...
Your grandmother has just passed away and left you her favorite necklace. You always loved your grandmother and will miss her greatly. You want to keep the necklace as a way to remember her, and you would never sell the necklace for any amount of money. Use the Y-axis on the graph to the right to demonstrate the following: 1.) Using the line drawing tool, draw the supply curve for your grandmother's necklace. 2.) Using the point drawing tool, determine the equilibrium price for the necklace. Label this point 'E'.
If you are not willing to sell the necklace for any amount of money, why is there an equilibrium price (particularly a price in thousands of dollars) for the necklace?
The diagram is incorrect, because it does not adequately reveal your preferences.
The necklace's price is determined by supply. Thus, it is a supply-determined item.
The equilibrium price simply reflects that, for this demand-determined item, you are the highest bidder.
The diagram reflects the fact that quantity demanded and quantity supplied are not equal.