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1、Chapter1NAMETheMarketIntroduction.Theproblemsinthischapterexaminesomevariationsontheapartmentmarketdescribedinthetext.Inmostoftheproblemswewkwiththetruedemcurveconstructedfromthereservationpricesoftheconsumersratherthant
2、he“smoothed”demcurvethatweusedinthetext.Rememberthatthereservationpriceofaconsumeristhatpricewhereheisjustindifferentbetweenrentingnotrentingtheapartment.Atanypricebelowthereservationpricetheconsumerwilldemoneapartmentat
3、anypriceabovethereservationpricetheconsumerwilldemzeroapartmentsexactlyatthereservationpricetheconsumerwillbeindifferentbetweenhavingzerooneapartment.Youshouldalsoobservethatwhendemcurveshavethe“staircase”shapeusedhereth
4、erewilltypicallybearangeofpriceswheresupplyequalsdem.Thuswewillaskfthethehighestlowestpriceintherange.1.1(3)Supposethatwehave8peoplewhowanttorentanapartment.Theirreservationpricesaregivenbelow.(Tokeepthenumberssmallthink
5、ofthesenumbersasbeingdailyrentpayments.)Person=ABCDEFGHPrice=402530351018155(a)Plotthemarketdemcurveinthefollowinggraph.(Hint:Whenthemarketpriceisequaltosomeconsumeri’sreservationpricetherewillbetwodifferentquantitiesofa
6、partmentsdemedsinceconsumeriwillbeindifferentbetweenhavingnothavinganapartment.)NAME3PersonABCDEFGHHighprice1818181825252525Lowprice1515151518151818(b)Supposethatthereweretwopeopleateachreservationprice10apartments.Whati
7、sthehighestpriceatwhichdemequalssupply18.Supposethatoneoftheapartmentswasturnedintoacondominium.IsthatpricestillanequilibriumpriceYes.1.3(2)Supposenowthatamonopolistownsalltheapartmentsthatheistryingtodeterminewhichprice
8、quantitymaximizehisrevenues.(a)Fillintheboxwiththemaximumpricerevenuethatthemonopolistcanmakeifherents12...8apartments.(Assumethathemustgeonepricefallapartments.)Number12345678Price403530251815105Revenue40709010090907040
9、(b)WhichofthepeopleA–FwouldgetapartmentsABCD.(c)Ifthemonopolistwererequiredbylawtorentexactly5apartmentswhatpricewouldhegetomaximizehisrevenue$18.(d)WhowouldgetapartmentsABCDF.(e)Ifthislldcouldgeeachindividualadifferentp
10、riceheknewthereservationpricesofalltheindividualswhatisthemaximumrevenuehecouldmakeifherentedall5apartments$148.(f)If5apartmentswererentedwhichindividualswouldgettheapartmentsABCDF.1.4(2)Supposethatthereare5apartmentstob
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