Suppose that we have 8 people who want to rent an apartment. Their reservation prices are given below. (To keep the numbers small, think of these numbers as being daily rent payments.)

(a) Plot the market demand curve in the following graph.
(b) Suppose the supply of apartments is fixed at 5 units. In this case there is a whole range of prices that will be equilibrium prices. What is the highest price that would make the demand for apartments equal to 5 units?
(c) What is the lowest price that would make the market demand equal to 5 units?
(d) With a supply of 4 apartments, which of the people A€“H end up getting apartments?
(e) What if the supply of apartments increases to 6 units. What is the range of equilibrium prices?

Transcribed Image Text:

Person A B C D E F G H Price 40 25 30 35 10 18 15 5