Question: Philips demand curve for housing is shown in the following figure. (Assume that quantity of housing is measured simply by the number of square feet. 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
foot, but the only apartment available to him has 112 square feet. Will Philip choose public housing or rent on the private market? Explain carefully. (Hint Compare consumer surplus [see the appendix to the book] under both possibilities.)