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Unformatted text preview: 1/4/11 Group Exercises Problem 1
Assume 8 people want to rent an apartment; reservations
prices are: k an.
r
Eiieervaﬁon 4o 25 30 35 10 18 is 5 W
.3 .2
a) Plot the/marke‘ttdemand curve 7 © 8‘ a:
b) Assume supply of apartments is ﬁxed 5 units; what
is the highest price that would make e market
demand equal to 5 units?
c) Assume the supply goes up to 6 un 5; what is the
range of equilibrium prices?
5) m
0) mm P. /5 [M m)
4 £23Lr6e78® M A: Problem 2 Assume that there are 5 units, but 1 is converted
to a condo. Person A decides to buy the
condo. ° What is the highest price at which the
demand will equal thesupply? /
5 3 ¢aj/ ﬁx" 1/4/11 zzscr5¢~2g 61
Problem3 Suppose that a monopolist owns all 5 of the
apartments. Assume that she must charge
one price for all apartments. Use the table below to ﬁgure out the price and
quantity that the monopolist will choose to
maximize revenue. M
M /CM wnggﬁo
4: W M 36 gm a/Wmo I«. Wwws 2%er
1 term“ Problem 4 Suppose that there are 5 apartments and that
the city imposed rent control. The maximum
rent allowed is $9. Assume that A, B, C, D, and
E get an apartment but F, G, and H are frozen
out. a) If subletting is practiced, who will sublet to
whom in equilibrium? b) What is the maximum amount that can be
charged for the sublet payment? 1/4/11 53) EO/W ﬁlm) W/‘% EWW 74: F (Va/ﬁe (57/?) Problem 5 Suppose that a tax of $5 was ievied on renters.
M a) What is the maximum that renters would be wiEling to
pay landlords if they each had to pay a $5 tax? “3 ‘" 5 : ‘ﬁK‘é‘rﬁff ‘rﬁgaﬁ'mr/a‘reaaa‘tﬁér” >Z\€§&W '7
a Waraa’aﬁaa 9. “(an A afar, "‘{gj u '®§§3épﬂlb§w%lﬁqmgﬁg ﬁgjaﬁﬁa
' v t «a» “Fiﬁ »  (14/ «5,
, , Efﬁgy :5» zéaregsﬁf arsrtaﬁaatégé Price hf .3 .2 b) What is the max equilibrium price if 5 a artments are #75 rented (the amount received by the iandiord)? c) How does this compare to what happens if the tax is
levied on the landlords? Regrrvrt°""aie 420.726 ‘30  6 13 l0 0 (W513 D) W WSW 4; wee/0a WM é/c 5 5mm” (Mr). ”95% M43 WW KW ﬂ‘ 79%" / am (MW: Wet/t m» M,» W W3 , ”J
é'mW Wr/B/Wﬂ/B ...
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 Spring '11
 Fergi

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