H. Varian Problem Sets

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The problems in this chapter examine some variations on
the apartment market described in the text. In most of the problems we
work with the true demand curve constructed from the reservation prices
of the consumers rather than the \smoothed" demand curve that we used
in the text.
Remember that the reservation price of a consumer is that price
where he is just indierent between renting or not renting the apartment.
At any price below the reservation price the consumer will demand one
apartment, at any price above the reservation price the consumer will demand
zero apartments, and exactly at the reservation price the consumer
will be indierent between having zero or one apartment.
You should also observe that when demand curves have the \staircase"
shape used here, there will typically be a range of prices where
supply equals demand. Thus we will ask for the the highest and lowest
price in the range.