Assume that the diagram below describes the apartment market in
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.
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