Rent control, economics, Microeconomics

Assume that the market equilibrium rent for two-bedroom apartments in Santa Monica, California is $1500 per month and the quantity is 40,000 units. The city council of Santa Monica establishes a rent control of $1200 per month on two-bedroom apartments.
(a) Assume that the elasticity of supply of two-bedroom apartments in Santa Monica is 1.5. What will be the new quantity supplied after the rent control?
(b) Assume that the elasticity of demand for two-bedroom apartments is 1. What is the quantity demanded at the rent controlled price and what is the shortage?

Posted Date: 3/21/2012 11:11:34 PM | Location : United States

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