Question

Scenario 1:

The elected officials in a west coast university town are concerned about the "exploitative" rents being charged to college students. The town council is contemplating the imposition of a $350 per month rent ceiling on apartments in the city. An economist at the university estimates the demand and supply curves as:

   QD = 5600 - 8P QS = 500 + 4P,        

where P = monthly rent, and Q = number of apartments available for rent. For purposes of this analysis, apartments can be treated as identical.

1. Consider Scenario 1 in the Supplement. Calculate the change in consumer surplus if the price ceiling is imposed.

2. Consider Scenario 1 in the Supplement. Calculate the equilibrium price if there is no price ceiling.

3. Consider Scenario 1 in the Supplement. What quantity of apartment will be available if the rent ceiling is imposed?

4. Consider Scenario 1 in the Supplement. Which of the following would vote for this price ceiling to be imposed? (Mark all that apply)

		Owners of the apartment buildings
		Students who are able find an apartment to rent
		Students who are unable find an apartment to rent
		A citizen of the town who only cares about maximizing total welfare of both renters and apartment owners

5. Consider Scenario 1 in the Supplement.    Calculate consumer surplus if there is no price ceiling.

Answer 1