Yan is a free-lance photographer who makes $50 for every hour she works. Houses similar to hers in her neighbourhood rent for $1000 per month. The following happened last year:
January She purchased a pre-existing house for $300,000.
February She hired a contractor to remodel her kitchen for $50,000.
April She bought $1,000 worth of wood and used 100 hours of her time to build a deck.
June She then decides she really does not like the house and decides to sell it. Yuri winds up paying $400,000 for the house.
(a) Assume that Yuri and Yan completed the sale without real estate agents or lawyers. Based on the information provided, what was this house’s contribution to GDP last year? (b) Assume instead that Yan hired Gonzo Real Estate to sell her house. Assume that Gonzo’s commission (the amount they receive for facilitating the sale) is 5% of the purchase price. Based on the information provided, how much GDP has been created?
(c) Assume instead that Yan sold the house to Gonzo Real Estate for $375,000. They then sell the house to Yuri for $400,000. Based on the information provided, how much GDP has been created?