Suppose that there are 8 people in a hypothetical town who want to rent an apart- ment. See below-table for their reservation prices of these 8 people. Person A B C D E F G H Rent / Price $4000 $2500 $3000 $3500 $1000 $1800 $1500 $500 a) Plot the market demand curve (discontinuous). b) Suppose the apartments supply is fixed at 5 units. What is the highest price that would make the demand for apartments equal to 5 units? Explain why? c) What is the lowest price that would make the market demand equal to 5 units? Explain why? d) With a supply of 4 apartments, which of the people A-H end up getting apartments?
Suppose that there are 8 people in a hypothetical town who want to rent an apart- ment. See below-table for their reservation prices of these 8 people. Person A B C D E F G H Rent / Price $4000 $2500 $3000 $3500 $1000 $1800 $1500 $500 a) Plot the market demand curve (discontinuous). b) Suppose the apartments supply is fixed at 5 units. What is the highest price that would make the demand for apartments equal to 5 units? Explain why? c) What is the lowest price that would make the market demand equal to 5 units? Explain why? d) With a supply of 4 apartments, which of the people A-H end up getting apartments?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:Suppose that there are 8 people in a hypothetical town who want to rent an apart-
ment. See below-table for their reservation prices of these 8 people.
Person
A
B
C
D
E
F
G H
Rent / Price $4000 $2500 $3000 $3500 $1000 $1800 $1500 $500
a) Plot the market demand curve (discontinuous).
b) Suppose the apartments supply is fixed at 5 units. What is the highest price that
would make the demand for apartments equal to 5 units? Explain why?
c) What is the lowest price that would make the market demand equal to 5 units?
Explain why?
d) With a supply of 4 apartments, which of the people A-H end up getting apartments?
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