For your group of 4 young people I would recommend looking at the Benalmadena area of Malaga Province. Not only does it have plenty to do, but it's also much more reasonably priced than the Marbella area. Benalmadena has a wonderful Marina with loads of shops, bars, clubs & Sealife Centre, all within the Marina itself. There is also 24 hour square with its clubs and discos. The beach and promenade are long, clean and backed by numerous bars and restaurants. There is a beautiful park, Paloma Park, with lake, animals & birds running free, a couple of cafe/bars and dolphin shows.
Close by in Arroyo there is a theme park "Tivoli World" with rides and shows. A cable car will also take you to the mountain top, where the views are incredible and where you can see a large collection of birds of prey and horse riding shows.
Torremolinos, with its water park, is nearby and Malaga city is 15 minutes away. Local transport (bus & train) is cheap and eating out is not only a treat but very reasonable too.
Apartments for rent can be found on this very informative website -
http://benalmadena.homestead.com/
Another site well worth a look is "holiday lettings" where you will find a good selection of apartments. You get a good description of the properties with photos, availability, prices and direct contact with the owners. All have good pools. Many of these are in the Bonanza/Gamonal area, which is ideally situated for the beach and Arroyo, and has many restaurants, bars and clubs with entertainment.
http://www.holidaylettings.co.uk/
Although you haven't said which month you intend going you shouldn't pay more than around £250 (£350 perhaps in the school summer holidays) for a one bedroom apartment to sleep 4 people.
Have been visiting Benalmadena regularly for 20 years.