<p>Consider the second problem below from Varian’s <strong>Intermediate Microeconomics</strong>:</p>

<blockquote>
  <p>Suppose that there were 25 people who had a reservation price of \$500, and the 26th person had a reservation price of \$200.</p>
  
  <p>In the above example, what would the equilibrium price be if there were 24 apartments to rent? What if there were 26 apartments to rent? What if there were 25 apartments to rent?</p>
</blockquote>

<p>For 24 apartments, the equilibrium price is \$500, and for 25, it’s \$200–\$500. So far, the answers in the back agree. However, for 26 apartments, I think the the equilibrium price should be \$0–\$200, whereas the book just says \$200 flat. I draw the supply-demand curve like this, where the blue line represents supply and black is demand:</p>

<p><a href="https://i.sstatic.net/D0hIx.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/D0hIx.png" alt="curve"></a></p>

<p>Here’s a screenshot of the answers for reference:</p>

<p><a href="https://i.sstatic.net/AXAWS.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/AXAWS.png" alt="answers"></a></p>

<p>Is the textbook correct, and if so, what am I missing here?</p>

CC BY-SA 4.0
2018-07-17T21:32:40.527Z
Are there only 26 people? There is no 27th guy?
Giskard
CC BY-SA 4.0
2018-07-18T00:44:03.903Z
@denesp That is what the question text suggests!
Yatharth Agarwal
CC BY-SA 4.0
2018-07-18T03:17:46.770Z
@YatharthAgarwal Given the information provided in question, there are 26 people who demand apartments in the market. Given their reservation prices, you are right in concluding that any price between 0 and 200 (both inclusive) clears the market.
Amit
CC BY-SA 4.0
2018-07-18T20:25:44.097Z
@Amit So you think the book is wrong?
Yatharth Agarwal
CC BY-SA 4.0
2018-07-19T08:00:14.460Z
@YatharthAgarwal Yes, book is wrong about this one.
Amit
<supply-and-demand>
Why is the equilibrium price not anything between \$0 and \$200?
Yatharth Agarwal
# Why is the equilibrium price not anything between \$0 and \$200?

(Asked by: username_0 on 2018-07-17)

Consider the second problem below from Varian’s **Intermediate Microeconomics**:

> Suppose that there were 25 people who had a reservation price of \$500, and the 26th person had a reservation price of \$200.
>
> In the above example, what would the equilibrium price be if there were 24 apartments to rent? What if there were 26 apartments to rent? What if there were 25 apartments to rent?

For 24 apartments, the equilibrium price is \$500, and for 25, it’s \$200–\$500. So far, the answers in the back agree. However, for 26 apartments, I think the the equilibrium price should be \$0–\$200, whereas the book just says \$200 flat. I draw the supply-demand curve like this, where the blue line represents supply and black is demand:

[![curve](https://i.sstatic.net/D0hIx.png)](https://i.sstatic.net/D0hIx.png)

Here’s a screenshot of the answers for reference:

[![answers](https://i.sstatic.net/AXAWS.png)](https://i.sstatic.net/AXAWS.png)

Is the textbook correct, and if so, what am I missing here?

**Tags:** supply-and-demand
> **Comments:**
> **username_1**: Are there only 26 people? There is no 27th guy?  
> **username_0**: @denesp That is what the question text suggests!  
> **username_2**: @YatharthAgarwal Given the information provided in question, there are 26 people who demand apartments in the market. Given their reservation prices, you are right in concluding that any price between 0 and 200 (both inclusive) clears the market.  
> **username_0**: @Amit So you think the book is wrong?  
> **username_2**: @YatharthAgarwal Yes, book is wrong about this one.  

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## 0 answers

