Consider a city with its boundary mapped onto quadrant I on the cartesian plane. Let x be distance from the central business district (CBD) where x € (0,x). Now consider two real estate user types, A and B. User A has a strong preference for proximity to the CBD while user B has stronger preference for open space. a. Which of the two user types has a more elastic demand for real estate with respect to distance from CBD? b. Let be the intersection point between demand from user A and B. Draw the demand curves for user A and B on the same graph and label the intersection point. Which user type has a higher willingness to pay for real estate at x € (0.£). Describe the location rule that assigns user types to the inner boundary of the city. c. d.

Consider a city with its boundary mapped onto quadrant I on the cartesian plane. Let x be distance from the central business district (CBD) where x € (0,x). Now consider two real estate user types, A and B. User A has a strong preference for proximity to the CBD while user B has stronger preference for open space. a. Which of the two user types has a more elastic demand for real estate with respect to distance from CBD? b. Let be the intersection point between demand from user A and B. Draw the demand curves for user A and B on the same graph and label the intersection point. Which user type has a higher willingness to pay for real estate at x € (0.£). Describe the location rule that assigns user types to the inner boundary of the city. c. d.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.12P

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