Question

Assume that the diagram below describes the apartment market in
Newark.

Part 1: Suppose that the government decides to impose rent control
in the amount of $600. Draw the price ceiling line.

Part 2: Use drop lines to indicate the quantity demanded
(Q-Demanded) and the quantity supplied (Q-Supplied) after the
imposition of the rent control.

Part 3: Use an area tool to illustrate the amount of consumer
surplus if only those who value apartments at a price greater than
or equal to the price on the demand curve that corresponds to the
quantity landlords are willing to supply given the price ceiling.
Label this area Cons-Surplus.

Part 4: Use an area tool to illustrate the amount of producer
surplus if producers adhere to the price set by the price ceiling.
Label this area Prod-Curplus.

Part 5: Use an area tool to illustrate the value of wasted
resources as a result of the price ceiling and label it Resource
Waste.

Part 6: Use an area tool to illustrate the deadweight loss
(D-W-Loss) due to the imposition of the rent control.

Make sure that you have labeled everything appropriately.

Answer #1

Suppose demand for apartments in Honolulu is P=6000-0.5q and
supply is P=0.25q.
a. Derive the equilibrium price and quantity for apartments.
Show on a graph. Calculate the producer and consumer surplus.
b. If the city of Honolulu passes a rent control, forcing a rent
(or price) ceiling equal to $1600, what is the quantity supplied,
quantity demanded, and the shortage? Calculate the new consumer
surplus, producer surplus, and deadweight loss, and show these on
your graph.
c. If a black...

Suppose demand for apartments in Honolulu is P=6600-0.5q and
supply is P=0.25q. Derive the equilibrium price and quantity for
apartments. Show on a graph. Calculate the producer and
consumer surplus. If the city of Honolulu passes a rent control,
forcing a rent (or price) ceiling equal to $1800, what is the
quantity supplied, quantity demanded, and the
shortage? Calculate the new consumer surplus, producer
surplus, and deadweight loss, and show these on your graph. If a
black market develops after the rent...

Elected officials in an east 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 all apartments in town. An economist at the
university estimates the demand and supply curves as:
QD =5,100−8P QS =4P,
where P is monthly rent, and Q is the number of apartments.
2a) What is the equilibrium price and quantity of apartments in
the market? Provide...

Suppose the market for potatoes can be expressed as
follows:
Demand: QD = 400 – 16P
Supply: QS = –40 + 4P
a) Calculate the equilibrium price and equilibrium quantity.
b) Suppose the government sets a price ceiling of $14 per unit,
what quantity demanded and quantity supplied would be realized?
c) Neatly sketch a diagram to represent parts a and
b on a single graph.
- Make sure to illustrate the equilibrium price and quantity,
the price...

Question 1 - Rent Control
(a) Use the market diagram to illustrate the imposition of a
rent ceiling above the market equilibrium price. What can you
explain from the graph?
(b) The equilibrium price in the housing market is very high.
What do you think will happen if the government imposes a very high
price ceiling that is below but very close to the equilibrium price
on the housing market, because a politician owns housing units in
certain areas? How...

Below you will find a supply and demand schedule for avocados.
Assume that the market is otherwise competitive and in equilibrium.
Then let the government institute a price floor at $7. You are to
illustrate this outcome; title your graph and draw supply and
demand , denote the efficient price and quantity, and exhibit the
price floor . Be sure to label deadweight loss , consumer surplus,
producer surplus , and any surplus or shortage that results .
Calculate the...

Consider a perfectly competitive market in the short-run with
the following demand and supply curves, where P is in dollars per
unit and Q is units per year:
Demand: P = 500 –
0.8Q
Supply: P = 1.2Q
Calculate the short-run competitive market equilibrium price
and quantity. Graph demand, supply, and indicate the equilibrium
price and quantity on the graph.
Now suppose that the government imposes a price ceiling and
sets the price at P = 180. Address each of...

Consider the information in the table below for a typical
market. Use the information from the table to answer the questions
(a) through (i) below.
Price
Quantity Demanded
Quantity Supplied
0
21
0
1
18
4
2
15
8
3
12
12
4
9
16
5
6
20
6
3
24
7
0
28
a. If the government set a price ceiling at $2, would there be a
shortage or surplus, and how large would be the
shortage/surplus?
b. If...

Suppose that the world price of cars is less than the
domestic market equilibrium price in Italy. Further, suppose that
the government decides to impose an import quota to decrease the
number of cars imported into Italy.
A. Using a graph, demonstrate the effect of the quota on the
quantity demanded and supplied domestically and the equilibrium
price, compared to the market equilibrium with free trade.
B. Illustrate on your graph the area that represents lost
consumer surplus due to...

Assume that the market for scones is in equilibrium.
Graph the market for scones, assuming unit-elastic supply and
demand. Label the equilibrium price Pe and the equilibrium quantity
Qe.
Average consumer income goes from $25,000 to $30,000 as the
quantity demanded increases from 50,000 units to 60,000 units. What
is the income elasticity for scones across this range?
Are scones a normal or inferior good? Explain using the income
elasticity coefficient.
Illustrate the effect of part (b) on your graph...

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