16) Suppose the government establishes a ceiling on the price of rental accommodation that is lower than the free-market equilibrium price. In this case, A) construction of new rental units will be encouraged. B) the rental housing market will be unaffected. C) those people who obtain rental units at the ceiling price will benefit. D) a surplus of current rental units will develop. E) the current stock of rental housing will be better maintained as there is a shortage of housing.
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Consider the market for rental housing in Your town. The demand and supply schedules for rental housing are given in the table.
|
Price ($ per month) |
Quantity Demanded (thousands of units) |
Quantity Supplied (thousands of units) |
|
1100 |
40 |
80 |
|
1000 |
50 |
77 |
|
900 |
60 |
73 |
|
800 |
70 |
70 |
|
700 |
80 |
67 |
|
600 |
90 |
65 |
|
500 |
100 |
60 |
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- In a Free market for rental housing, what is the equilibrium price and quantity?
- Now suppose the government in Your town decides to impose a ceiling on the monthly rental price. What is the highest level at which such a ceiling could be set in order to have any effect on the marker? Explain your answer.
- Suppose the maximum rental price is set equal to $500 per month. Describe the effect on quantity demanded, supplied, and exchanged in the rental-housing market.
- Suppose a black market develops in the presence of the rent controls in part (c). What is the black market price that would exist if all of the quantity supplied were sold on the black market?
suppose that the demand and supply schedules for rental apartments in the city of gotham
Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below.
|
Rent |
Demand |
Supply |
|
2,500.00 |
10000 |
15000 |
|
2,000.00 |
12500 |
12500 |
|
1,500.00 |
15000 |
10000 |
|
1,000.00 |
17500 |
7500 |
|
500.00 |
20000 |
5000 |
1.What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?
2.If the local government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
3.Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
4.Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of the housing. Assuming that demand remains unchanged, by how many units of housing would the government have to increase the supply of housing in order to get the market equilibrium rental price to fall to $1500 per month? To $1000 per month? To $500 per month?
Suppose that the demand and supply schedules for rental apartments in the city of Gotham are as given in the table below.
|
Rent |
Demand |
Supply |
|
2,500.00 |
10,000 |
15,000 |
|
2,000.00 |
12,500 |
12,500 |
|
1,500.00 |
15,000 |
10,000 |
|
1,000.00 |
17,500 |
7,500 |
|
500.00 |
20,000 |
5,000 |
1. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?
2. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1,500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
3. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2,500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
4. Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming that demand remains unchanged, by how many units of housing would the government have to increase the supply of housing to get the market equilibrium rental price to fall to $1500 per month? To $1000 per month? To $500 per month?
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