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Public and private housing demand curve

Philip's demand curve for housing is shown in the figure below. (Assume that quantity of housing is measured simply by the number of square metres. Other aspects of quality are ignored.)The market price of housing is P1; Philip can purchase as much housing as he desires at that price. Alternatively, Philip can live in public housing for a price of P2 per square metre, but the only apartment available to him has H2 square metres. Will Philip choose public housing or rent on the private market? Explain carefully.


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Demand curves show us how buyers' willingness to pay changes with quantity purchased. As the price falls, the amount that consumers want increases. As price increases, buyers want fewer items because the overall cost is too high otherwise. In this case, we see that at the higher price P1, Philip is willing to buy ...

Solution Summary

Use of a demand curve to determine an individual's choice of housing