Question

If Priscilla had a monthly income of $2000, she would be willing to pay $1600 to rent an apartment.

But Priscilla only has a monthly income of $1000, so she is willing and able to pay only $1000 to rent an apartment.

Idris has a monthly income of $4000, and he is willing to pay $2000 to rent an apartment.

Priscilla's constrained willingness-to-pay is ___ and her unconstrained willingness-to-pay is ___. Idris's constrained willingness-to-pay is ___ and his unconstrained willingness-to-pay is ___.

Answer 1

Priscilla's constrained willingness-to-pay is $1000 and her unconstrained willingness-to-pay is $1600, while Idris's constrained willingness-to-pay is $2000 but his unconstrained willingness-to-pay is not specified.

Step-by-step explanation:

Priscilla's constrained willingness-to-pay is the maximum amount she is willing and able to pay given her limited income which is $1000. Her unconstrained willingness-to-pay, which reflects the amount she would be willing to pay if she had sufficient income, is $1600. Idris's constrained willingness-to-pay, similar to Priscilla's, is the maximum he is willing to pay with his current income, which is $2000. Idris's unconstrained willingness-to-pay is not clearly stated in the question, but since he chooses to pay $2000 with a $4000 income, we may infer that this is his constrained willingness-to-pay but may not necessarily reflect his maximum willingness-to-pay if his income were higher or unlimited.