2. In Milwaukee, Wisconsin, all households have the same tastes, but some households are rich, and some are poor.The two income groups have the same demand curve for housing, given by:

q = 10(p^1/2y^1/2)

where q is square footage of housing, p is the monthly rent per square foot of housing and y is monthly income.Rich households earn $2500 per month and poor households earn $900 per month.Amenities and public services are the same everywhere in the urbanized area. There is one commuter per household and all commuters work downtown.Commuting costs (t) are $100 per mile per month. There are two bid-rent curves (one for each income group) that cross at the distance x*.At x* the price of housing is $4 per square foot.

1. Give a general expression for the slope of a bid-rent curve for housing (i.e. p/x).Be sure to define your terms.
2. At x* how much housing do rich households consume?How much housing do poor households consume?What is the income elasticity of the demand for housing?
3. Calculate the slopes of the two bid-rent curves?Which one is steeper?
4. Which group, the rich or the poor, lives closer to the Milwaukee central business district?Which group lives further away?Explain.