Consider the following supply schedule for apartments in a local market.
a. Draw the supply curve for apartments. Be sure to label the axes.
b. Suppose the going rental price for apartments is $550 per month. How many apartments will be supplied? (Assume the supply curve is a straight line between the points in the table above.)
c. Indicate the area of market producer surplus in your graph. Also indicate the area that represents the total cost of supplying apartments.
d. Next, assume that a particular landlord is willing to supply an apartment only if the rental price is at least $450 per month. What is her producer surplus in this market? Use a graph to support your answer.
e. Suppose that the price for condominiums in the area increases. This creates an incentive for apartment owners to sell their apartments as condominiums, thus removing them from the rental market. What would you expect to happen to producer surplus in the apartment market as a result of this change? Draw a graph to support your answer.