I don't grok the emboldened hypothetical. I simplified the math in the title; dividing prices by 1000 doesn't transmogrify factual pattern.
If car = 3K if of the age repesented, then Alex got a bargain of 500 = (3 – 2.5)K.
Thus why would Alex get "an award of £800 (£3,000 less the £2,200 value of the car received)"? Alex wouldn't get anything!
Where's his contractual loss of bargain rather than returning each party to their starting positions"?
Damages in lieu of rescission
Alex buys a car from Phillippa for £2,500, but due to a misrepresentation about the car’s age, the car is only worth £2,200. If Alex rescinded, he would return to Phillippa the car worth £2,200 and get his £2,500 back from Phillippa. So he has his £2,500 back in his hands.
If the court decides to award damages in lieu of rescission under s.2(2), such damages would have to achieve the same result. Since no rescission is being ordered, Alex keeps the car worth £2,200 so he needs another £300 to bring him up to the £2,500 he could have got under rescission. What these damages should not cover, however, is any other items of loss, for example suppose Alex has purchased £100 of accessories which only fit models of the year he thought he was purchasing and which are now useless to him. Such losses would have been left equally uncompensated if rescission plus indemnity had been awarded and they can only be recovered if Alex establishes some other right to damages, for example under s.2(1), which is considered later. Similarly, if the car would have been worth £3,000 if of the age represented, there should be no question of getting an award of £800 (£3,000 less the £2,200 value of the car received) since that would be to give him his contractual loss of bargain rather than returning each party to their starting positions. To gain such loss of bargain damages, Alex would have to prove that the age of the car was a term, not just a representation and that there was therefore a breach of contract.