Question

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?

Answer 1

Answer: 500 square units

Step-by-step explanation:

q = 0.5*(y/p)

y = $2000

p = $2/square unit

q = 0.5*(2000/2)

= 500 square units