what is the effect on the quantity of rental space in a market area and prevailing...
what is the effect on the quantity of rental space in a market area and prevailing market rents, over the short run and the long run, of shifts in demand for rentable space?
Homework Answers
Suppose there is an increase in demand represented by rightward shift in demand curve, from D to D'. In short run equilibrium is reached at e' because in short run market supply is fixed because it takes time to construct market spaces. Market rental increases to P' and quantity of market spaces remains unchanged at Q.
In long run supply of market spaces increases which shifts the supply curve rightward to S'. Long run equilibrium reaches at e'' that results in decrease in equilibrium rental to P and increase in market spaces to Q'.
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what is the effect on the quantity of rental space in a market
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