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The demand for apartments is P=1200-Q while the supply is given by P=Q units.
Graph the supply and demand curves.
What is the slope of the supply curve? What is the P-intercept of the supply curve?
What is the slope of the demand curve? What is the P-intercept of the demand curve?
What is the equilibrium price and quantity of apartments?
Now suppose that the government imposes rent control at P=$300/month so the price of apartments in the market is $300/month. At a price of $300/month is there excess demand or excess supply? How much?
Now, suppose the reservation price of each buyer in the market increases by $200/month. What is the new equation of the demand curve?
If the rent control stays at $300/month with the new demand curve, is there excess demand or excess supply? How much?
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