Problem
College Enrollment and Apartment Prices. Consider a college town where the initial price of rental apartments is $400 and the initial quantity is 1,000 apartments. The price elasticity of demand for apartments is 1.0, and the price elasticity of supply of apartments is 0.50. (Related to Application 4 on page 430.)
a. Use demand and supply curves to show the initial equilibrium, and label the equilibrium point a.
b. Suppose that an increase in college enrollment is expected to increase the demand for apartments in a college town by 15 percent. Use your graph to show the effects of the increase in demand on the apartment market. Label the new equilibrium point b.
c. Predict the effect of the increase in demand on the equilibrium price of apartments.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.