Determine the equilibrium rental price and quantity

Reference no: EM1373842

1) Price Ceiling
A local market for three-bedroom rental units is depicted by the following demand and supply equations:
Qd = 2000-P
Qs = -1000+P
Where P is the rental price in dollars and Q represents the number of rental units.

a) Determine the equilibrium rental price and quantity of three-bedroom apartments?

Now, assume that, in an attempt to provide affordable housing, the local municipality imposes a ceiling of $1,250 for the rental price of three-bedroom apartments.

b) Find the availability of three-bedroom rental units at this price?
c) Determine the demand for these units at the government-mandated price?
d) What is the change in consumer and producer surplus associated with the rental policy change? (Calculate the dollar amount of the change in consumer surplus and the dollar amount of the change in producer surplus.)
e) Find the change in total surplus associated with the rental policy change? (Calculate the dollar amount of the change in total surplus.)
f) Do you think the rental policy change would increase or decrease landlords' incentives to improve the quality of three-bedroom rental units? Explain.

2) Price Floor
Assume the demand and supply of fast food employees is depicted by the following equations:
Ld = 1000-100w (labor demand curve)
Ls = -500+200w (labor supply curve)
Where L depicts the number of employees and w depicts the hourly wage rate for fast food workers.

a) Determine the equilibrium wage and employment level for this example?

Now, suppose that Congress passed legislation increasing the minimum wage level to $5.15 an hour.

b) What is the new employment level when the minimum wage law is imposed?
c) What is the difference in the number of individuals willing to work at the minimum wage and the demand for workers at this wage rate?
d) Who is better off with the minimum wage law?
e) Who is worse off with the minimum wage law?

1) Tax
A country that does not currently tax cigarettes is considering the introduction of a $0.40 per pack tax. The economic advisors to the country estimate the supply and demand curves for cigarettes as:
Qd = 140,000-25,000P
Qs = 20,000+75,000P
Where Q= daily sales in packs of cigarettes and P = price per pack. The country has hired you to provide the following information regarding the cigarette market and the proposed tax:

a) What are the equilibrium price and quantity with no tax?
b) What price and quantity would prevail after the imposition of the tax? What portion of the tax would be borne by buyers and sellers, respectively?
c) Compute the deadweight loss from the tax. Could the tax be justified despite the deadweight loss? What tax revenue will be generated?

Reference no: EM1373842

Questions Cloud

Illustrate what pieces of information should these systems : Illustrate what pieces of information should these systems collect to help management make merchandising decisions that support this strategy.

Decide the size of the kanbans for the mains haft assembly : Maggie Moylan Motorcycle Corporation uses kanbans to support its transition assembly line. Decide the size of the kanbans for the mains haft assembly.

Minimum wage set at the competitive level : Describe how the equilibrium in a labor market with a monoposony employer changes if a minimum wage is set at the competitive level.

Question about sticky wages : Think a proposal required all workers to provide each employee with health insurance. if a proposal would require all employers to give each worker health insurance,

Determine the equilibrium rental price and quantity : A local market for three bedroom rental units is depicted by the following demand and supply equations;

Determine the initial effects of this monetary policy : Think IS LM BP model of an open economy with sticky price levels in local currency, perfect asset substitutability, perfect capital mobility and static expectations.

Find the level of equilibrium gdp : Assume you also have the following additional macroeconomic information of Bush Garden economy in the context of Keynesian Expenditure model.

Effect on interest rates and unemployment : Discuss how the Federal Reserve kept the United States from sliding into a deeper recession after September 11, 2001.

Unification of us, canada, and mexico as a single economy : Canada, the US and Mexico are clearly separate countries. Does this information alone imply a lower standard of living in each of three nations compared to the condition where they are united into a single new country?

User Account

All Pages