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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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