A rent ceiling prohibits charging rent that exceeds the ceiling amount. Suppose the government decides to put a rent ceiling.

(a) With the help of a diagram showing the effect of a rent ceiling on the supply and demand of a rented house if the ceiling is set below the market equilibrium rent.

(b) What will be the resultant effects on the supply and demand of a rented house if the ceiling is set above the market equilibrium rent?

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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

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?

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Consider the demand and supply for used science textbooks. Supposed that the used textbook market is competitive with supply given by P=10+.1Q and demand given by P=100-.08Q. Solve for the competitive market equilibrium price and quantity of used textbooks in this market. Determine the quantity of shortage or surplus that would occur if a price ceiling (maximum allowable price) of $35 was imposed on this market. Describe why the market fails to be efficient in the context of this ceiling and what market participants commonly do to overcome the inefficiency caused by official prices below the equilibrium market price. If the intention is to help low income students, compare the effects of the price ceiling to an alternative scheme of giving $25 purchase vouchers to low-income students. In your answer, consider the effect of the vouchers on the demand for textbooks.