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12 February, 16:05

Consider the Smith family who have the following demand for rental housing (q, measured in square feet):

q = 0.5 * (y/p),

where y is the Smith family income and p is the price of housing per square foot. The Smith's income is $2000 per month and initially the price of housing is $2 per square foot.

If the Smiths are operating on their demand curve, how much housing are they consuming?

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  1. 12 February, 17:08
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    Answer: 500 square units

    Explanation:

    q = 0.5 * (y/p)

    y = $2000

    p = $2/square unit

    q = 0.5 * (2000/2)

    = 500 square units
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