Question

Questions 5-9 PLEASE!

. In the absence of rent control, what would the equilibrium price and quantity be? What would be the increase from 2002 to 2003 in the quantity of housing supplied?

Multi-Part Question Suppose that in 2002 the market for rented apartments in Manhattan has the following supply and demand curves: Q 4000-P QS- -1000 + 4P where P is the monthly rent. What is the equilibrium price (rent) for an apartment? How many apartments are built and rented out? Now suppose the government imposes rent control, ruling that rents may not rise above $500. What is the excess demand (shortage) of apartments? What is the total deadweight loss (in dollars)? 1. 2. 3. 4. In 2003 the population of Manhattan rises by 100, which increases the quantity demanded at 5 In the absence of rent control, what would the equilibrium price and quantity be? What would 6. Suppose the rent control of the previous year is still in place. What is the increase in the any price by 100. What is the new demand curve? be the increase from 2002 to 2003 in the quantity of housing supplied? quantity of housing supplied? What is the excess demand (shortage) of apartments? What is the deadweight loss? 7. Based on your answers to 2 and 6, how might rent controls help explain why it is getting harder 8. Suppose no rent control existed, and the equilibrium rent (price) prevailed. What would be the 9 Suppose rents continued to grow at this rate. How many years would it take for the rental rate and harder to find an apartment in Manhattan? percentage growth in rental rates from 2002 to 2003? to double?

Answer 1

Q^D = 4000 - P Q^s = -1000 + 4P 2n Equilibrium Q^D = Q^S therefore 4000 - P = -1000 + 4P therefore 5P = 5000 therefore P = 1000 therefore Q^D = Q^S = 3000 If govt imposes rent control and rules that rent may not rise above 500 then- Q^D = 4000 - 500 = 3500 Q^S = -1000 + 4 times 500 = -1000 + 2000 = 1000 Excess demand = 3000 - 1000 = 2000 If in 2003 population increase by 100 which increases quantity demanded at any prices by 100 therefore New demand will be Q^D = 4100 - P Now if there is no rent control then after new quantity demand the equilibrium price and quantity will be an follows- Equilibrium Q^D = Q^S therefore 4100 - P = -1000 + 4P therefore 5P = 5100 therefore P = 1020 therefore P* = 1020 Q^D = Q^S = 4100 - 1020 = 3080 In the absence of rent control after rise