Question

A price ceiling for housing sets rent at maximum of $1,300, with Qd of 1,000 apartments....

A price ceiling for housing sets rent at maximum of $1,300, with Qd of 1,000 apartments. Before equilibrium was $850 with Qd of 1,100. What is the elasticity of demand for housing in our scenario? Use the points provided in the demand curve. Is housing elastic or inelastic, comment on what elasticity is doing to consumer and producer behavior in this scenario?

Homework Answers

Answer #1
Elasticity of Demand = -Percentage Change in Quantity Demanded/Percentage Change in Price

Percentage Change in Quantity Demand = Change in Demand/Old Demand

Percentage Change in Quantity Demand = (1,100-1000)/1,000

Percentage Change in Quantity Demand = 10%

Percentage Change in Price = Change in Price/Old Price

Percentage Change in Price = (850-1300)1300

Percentage Change in Price = -34.61%

Elasticity of Demand = -10%/-34.61%

Elasticity of Demand = 0.289

Demand is inelastic and graph would look like:

Since elasticity is inelastic, change in prices does not affect much to the consumers and suppliers cannot make huge profits by changing prices. Consumers will demand nearly same or little different.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In general, what is a price ceiling? Group of answer choices A price ceiling sets the...
In general, what is a price ceiling? Group of answer choices A price ceiling sets the maximum price at which a good can be legally sold. A price ceiling sets the minimum price at which a good can be legally sold. A price ceiling comes in the form of a minimum wage none of the above Flag this Question Question 21 pts In general, what is a price floor? Group of answer choices A price floor sets the maximum price...
Suppose demand for apartments in Honolulu is P=6600-0.5q and supply is P=0.25q. Derive the equilibrium price...
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...
34. A government-imposed ceiling on apartment rents, if set above the equilibrium rent level, would A.  ...
34. A government-imposed ceiling on apartment rents, if set above the equilibrium rent level, would A.   have no effect on the housing market. B.    lead to a persistent shortage of apartments. C.    lead to a persistent surplus of apartments. D.   shift the supply curve for apartments to the right. 41. We have a flexible exchange rate system, in equilibrium and with the balance of trade in balance. Now, U.S. exports become less attractive to foreign purchasers. The U.S. can expect...
The band Atomic Rooster has gotten back together and recorded a new album, "Home To Roost."...
The band Atomic Rooster has gotten back together and recorded a new album, "Home To Roost." Below is demand and supply information at different prices for downloads: PRICE DEMAND SUPPLY $4                    1400    50 8             1150     150 12                   900    250 16                     650 350 20                    400 450 24                     150 550 A) Using excel or done neatly by hand, draw demand and supply curves using the information above. B) Label and state the equilibrium point and explain...
Closed book and closed notes. 3. Basic Calculators are permitted. 4. Read all instructions and questions...
Closed book and closed notes. 3. Basic Calculators are permitted. 4. Read all instructions and questions carefully. 5. Show all your work. 6. Please place your Coquitlam College Identification Card face up and visible on your desk. 7. Electronic devices including cellular phones must be turned off and put away during the exam. 8. Any student who has a cell phone or other unauthorized electronic device (i.e. laptop, and et cetera.) on their person or around their desk during this...
practice quiz 1. A legal maximum price at which a good can be sold is a...
practice quiz 1. A legal maximum price at which a good can be sold is a price a. floor b. stabilization c. support d. ceiling 2. A price floor is not binding if a. the price floor is higher than the equilibrium market price b. the price floor is lower than the equilibrium market price c. people are willing to buy less when the price floor is imposed as they did before d. the government sets it 3. Rationing by...
Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer....
Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer. ____ 2. Consumers should purchase quantities of a good to the point where MU > P. ____ 3. Voluntary exchange requires that there must be mutual gain. ____ 4. Points along a budget line represent the maximum combinations of two commodities that a consumer can afford. ____ 5. The budget line represents a consumer's preferences for a commodity. ____ 6. A change in consumer...
1.) True or False? For all societies, resources are scarce, and technology is limited, while people’s...
1.) True or False? For all societies, resources are scarce, and technology is limited, while people’s wants and needs for goods and services seem to be unlimited. (2 points) 2.) (1 point) Adam Smith’s “invisible hand” refers to a.) the subtle and often hidden methods that businesses use to profit at consumers’ expense. b.) the ability of free markets to reach desirable outcomes, despite the self-interest of market participants. c.) the ability of government regulations to benefit consumers, even if...
1. Which is statement is true? I. A single-price monopolist charges a price equal to the...
1. Which is statement is true? I. A single-price monopolist charges a price equal to the marginal cost of the last unit sold. II. A monopolist with positive marginal costs and facing a linear demand curve always sets a quantity (or price) such that it sells on the elastic section of the demand curve. III. A monopolist regulated by marginal-cost pricing regulation sells at a price that covers its variable and fixed costs of production, but it still causes a...
In economics, the term “scarcity”meansthere .
In economics, the term “scarcity”meansthere                    .is a shortage of the factors ofproductionis equilibrium in themarketare unlimited wants and only limitedresourcesare limited wants and unlimitedresourcesA country has an absolute advantage in producing cars ifthat country                    .has a lower opportunity cost of producing cars than any othercountrycan produce more cars in a given amount of time than any othercountryhas a higher opportunity cost of producing cars than any othercountrycharges the highest price forcarsDuring bad economic times, many people lose their jobs. How would that...