Use the information on the market for apartments in Bay City in the table to answer the following questions:
| Rent |
Quantity Demanded |
Quantity Supplied |
| $500.00 |
375,000 |
$225,000.00 |
| 600 |
350,000 |
250,000 |
| 700 |
325,000 |
275,000 |
| 800 |
300,000 |
300,000 |
| 900 |
275,000 |
325,000 |
| 1,000 |
250,000 |
350,000 |
a. In the absence of rent control, what is the equilibrium rent and what is the equilibrium quantity of apartments rented? Draw a demand and supply graph of the market for apartments to illustrate your answer. In equilibrium, will there be any renters who are unable to find an apartment to rent or any landlords who are unable to find a renter for an apartment?
b. Suppose the government sets a ceiling of $600 per month on rents. What is the quantity of apartments demanded, and what is the quantity of apartments supplied?
c. Assume that all landlords abide by the law. Use a demand and supply graph to illustrate the effect of this price ceiling on the market for apartments. Be sure to indicate on your graph each of the following: (i) the area representing consumer surplus after the price ceiling has been imposed, (ii) the area representing producer surplus after the price ceiling has been imposed, and (iii) the area representing the deadweight loss after the price ceiling has been imposed.
d. Assume that the quantity of apartments supplied is the same as you determined in (b). But now assume that landlords ignore the law and rent this quantity of apartments for the highest rent they can get. Briefly explain what this rent will be.