I just cannot, for the life of me, understand how you make a profit by it.
In: Economics
My high school economics teacher explained it to me like this:
Your friend is going on vacation for two weeks and asks you to look after his Corvette.
While he’s away, you sell his car for $50,000. A few days later, Chevy releases a statement saying that that particular model is being recalled for faulty brake lines, and the value of the car plummets. Before your friend returns from vacation you buy the car back for $25,000 and put it back in his garage as if nothing happened.
You’ve just made $25,000 and nothing else has changed.
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