Calculate a range for possible consumer surplus

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Reference no: EM133621015

Assignment:

1. The elected officials at a West Coast university town are concerned about the "exploitative" rents being charged to college students. The town council is contemplating the imposition of a $375 monthly rent ceiling on apartments in the city. An economist at the university estimates the demand and supply curves as:

QD = 5, 600 - 8P and QS = 200 + 4P ,

where P = monthly rent, and Q = number of apartments available for rent. For purposes of this analysis, apartments can be treated as identical.

a. Calculate the equilibrium price and quantity that would prevail without the price ceiling. Calculate the total surplus.

b. What quantity will eventually be available if the rent ceiling is imposed? Calculate the shortage.

c. Calculate a range for possible consumer surplus.

d. Calculate the producer surplus.

e. Calculate a range for possible deadweight loss.

2. From time to time, Congress has raised the minimum wage. Some people suggested that a government subsidy could help employers finance the higher wage.

Reference no: EM133621015

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