Question

price rent per month 200 250 300 350 400 450
quantity demanded 400 375 350 325 300 375
quantity supplied 100 150 200 250 300 350
a. what are the equilibrium price and quantity of two-bedroom apartments in collegeville?
b. the city council of collegeville receives a petition from students complaining about the high rents in town. As s result the council creates a price ceiling that is$100 below the equilibrium price. What is the new market price? how many two bedroom apartments will be rented?
c. landlords show up at the next council meeting and demand an increase in rents. the council members concerned about their upcoming reelection campaigns vote torepeal the price ceiling and instead replace it with a price floor that is 50$ above the equilibrium. what is the new market price? how many two-bedroom apartmentswill be rented?

Answer 1

a.Ans: price 400- demand 300- two bedroom apartments rented- 300

b.Ans: price 300 - demand 350- two bedroom apartments rented -200

c.Ans: price 350 - demand 325 -two bedroom apartments rented- 250

Answer 2

a. Equilibrium price and quantity: Equilibrium price is occurred at the point where demand and supply is equal. Supply of apartment and demand for apartments is equal at the quantity of 300. Thus equilibrium quantity is 300 and price is S400 b. Price ceiling of S100 below equilibrium price: Equilibrium price is $400 and Price ceiling is $100 below than equilibrium price. Thus, new price is $300 (400-100). At this rent S300 supply is 200 houses and demand is 350 houses. Thus, 200 houses are rented. b. Price floor of S50 above equilibrium price: Equilibrium price is $400 and Price floor is $50 above than equilibrium price. Thus, new price is $450 (400+50). At this rent $450 supply is 350 houses and demand is 275 houses. Thus, 275 houses are rented