About transfer of producer surplus or about deadweight loss

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Many people wish to live in the beautiful town of Beachfront by the sea, but they don’t like the rents. In its current market equilibrium, Beachfront has 20,000 rental apartments at an equilibrium price of $3,000 per month. The voters of Beachfront impose rent controls at the price of $2,000 per month and the number of rental apartments available in the market shrinks to $16,000. Based on this information, sketch demand and supply curves for the town of Beachfront. a. Identify consumer surplus and producer surplus before the price ceiling is enacted. b. Show how the price ceiling transfers producer surplus to consumers. c. Show how the price ceiling creates deadweight loss. d. If you were renting an apartment in Beachfront already, are you likely to care more about the transfer of producer surplus or about the deadweight loss? Explain briefly.

Reference no: EM131004620

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