Question

18

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

Instructions: Enter your answers as whole numbers.

a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?

Market equilibrium rental price is:

Market equilibrium quantity is:

b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1,500, will there be a surplus or a shortage?

  (Click to select)   Surplus   Shortage

Of how many units?

How many units will actually be rented each month?

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 $2,500 per month. If the government can enforce that price floor, will there be a surplus or a shortage?

  (Click to select)   Surplus   Shortage

Of how many units?

How many units will actually be rented each month?

d. Start at the original (correct) equilibrium price and quantity in part a. 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 $1,500 per month?

To $1,000 per month?

To $500 per month?

Answer 1