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Homework answers / question archive / Consider twn students who think about rent- ing an inner ring (IR) apartment in College Town

Consider twn students who think about rent- ing an inner ring (IR) apartment in College Town. Their reservation prices (in no particular order) are 320, 280, 380, 420, 240, 380, 260,440,480, and 400 respec- tively. Suppose the supply of IR apartments is fixed at N = 6, and all landlords have reservation prices of zero. a) Plot an ordered list of the students' RPs in a diagram. b) Plot the market demand curve, and the market supply curve in a diagram. Explain why your plot in a) is identical (except for the labelling of the vertical axis) to your demand plot in b) c) Find the market equilibrium. How many IR apartments are rented out in a competitive equilibrium? To whom? At which price(s)? Explain. d) Suppose the supply of IR apartments increases to N = 8. How does the equilibrium change? (Use a graph to find the solution). Question 2 (Continuation of Q1) Let again N = 6, and suppose that 2 of those IR apartments are converted into condos. How does the equilibrium in the IR rental market change if (a) both condos are bought by investors, who rent them out to retired alumni of Prairie College. (b) both condos are bought by students for their own use one of these students has a RP of 300, the other a RP of 420. (c) same as (b), but the two students have RPS of 380 and 480, respectively. (c) both condos are bought by a student with an RP of 280, one for her own use, the other for her parents' use. Graph each of these situations in a diagram, find the market equilibria, and explain.

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