Consider a college town where the initial price of rental apartments is $500 and the initial quantity is 3,000 apartmen...
Consider a college town where the initial price of rental apartments is $500 and the initial quantity is 3,000 apartments. The price elasticity of demand for apartments is 1.25, and the price elasticity of supply of apartments is 0.75. Use demand and supply curves to show the initial equilibrium, an label the equilibrium point a. Suppose that an increase in college enrollment is expected to increase the demand for apartments in the college town by 30 percent. Use your graph to show the effects of the increase in demand on the apartment market. Label the new equilibrium point b. Predict the effect of the increase in demand on the equilibrium price of apartments. Find the new equilibrium quantity given the new price
Homework Answers
.Equilibrium is determined at the intersection of the demand and supply curve.Eqilibrium point is Po and quantity is Qo.
B.As a result of shift in demand the new demand curve D' intersects the new supply curve at a higher price level.Equilibrium is established at b.
C.The equilibrium price rises.
D.30% increase in demand=30% of 3000=300
New quantity=3300
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