Question

1. State one factor on demand and one factor on supply to explain the rising rent in the housing market in Hong Kong in the past decade. (2 marks)

2. With the aid of a demand-and-supply diagram, explain the impacts on tenants and landlords when the government provides per-unit subsidy to landlords.

   (6 marks)

Answer 1

The housing rent is rising due to the following reasons

Demand side - the population density is increasing and more people opt to live in that developed city, which is a financial hub.

Supply side- the land available for residential and other developmental activities is very less.

When subsidy is given to the landlord ,it will increase the availability of houses for rent at a lower price. The supply curve will shift to the right. It will shift from S to S1.

The subsidy per unit is T-P . The quantity supplied increases from Q0 to Q1. Here, quantity denotes the number of houses for rent. The rent the tenant has to pay will decrease from R0 to R1. The gain to the tenant is R0SPR1. The gain to the producer is RTSR0.

RENT N 2 da, QUANTITY