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Five families are interested in renting an apartment

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Five families are interested in renting an apartment in the Ein Havered neighborhood. The maximum prices (maximal) in NIS that each family is willing to pay for monthly rental fees of the apartment in the neighborhood are presented in the table below:

Family
Maximum Price (NIS)
Biton
4,500
Amsalam
4,000
Ofir
3,500
Bracha
3,000
Leibowitz
2,500

In addition, there are six apartments for rent in the neighborhood. The minimal price for which it is worthwhile for the apartment owner to lease the apartment (if the price is lower, they will prefer not to place it on the rental market) is given in the table below.

Apartment Minimal Rental Fess (NIS)
1 2,000
2 2,500
3 2,800
4 3,000
5 3,200
6 3,500

Assume that the rental apartment market in the neighborhood operates under perfect competition conditions.

a. In a graph (diagram) draw the demand curve and the supply curve for apartments (the curves are in the form of "steps"). Find the equilibrium price and the equilibrium quantity and list which families will rent apartments in the neighborhood.

b. What is the consumer surplus of the Biton family? Briefly explain.

c. Calculate the consumer surplus in the rental apartment market in the neighborhood, the "producer" surplus (the surplus of the apartment owners) and the total surplus.

d. Is there another price at which the total surplus can be higher?

Reference no: EM132526586

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