Supply schedules for rental apartments

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Assignment 1:

Suppose that the demand and supply schedules for rental apartments in a city are as given in the table below.

Monthly rent

Apartments demanded

Apartments supplied

$3000

8,000

17,000

2500

10,000

15,000

2000

12,500

12,500

1500

15,000

10,000

1000

17,500

7,500

500

20,000

5,000

a. Draw a figure showing the demand curve and the supply for apartments. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?

b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1000, will there be a surplus or a shortage? Of how many units? Explain how the market can adjust?

c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? Explain how the market can adjust?

d. Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming that demand remains unchanged, by how many units of housing would the government have to increase the supply of housing in order to get the market equilibrium rental price to fall to $1500 per month? To $1000 per month? To $500 per month?

Reference no: EM131045964

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