Consider a perfectly competitive market for rental housing. The monthly (inverse) demand and supply functions for rental units are given by P = 70 – 0.7QD & P = 10 + 0.3QS, where P is monthly rent, and Q is the number of rental units. Note: Each numerical value MUST be rounded to ones. ex) 34.3 --> 34 or 1.5 --> 2
Part a) Using the given inverse functions above, compute the equilibrium price and quantity.
Q* =
P* =
Part b) Now suppose the government sets a maximum rent at $19. Compute the following under this price control.
Market quantity =
MB =
CS =
DWL =
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