Suppose that the demand and supply schedules for the rental apartements in the city of Gotham are as given in the table below. Monthly Rent Apartments Demanded Apartements Supplied $2500 10,000 15,000 2000 12,500 12,500 1500 15,000 10,000 1000 17,500 7500 500 20,000 5000
a. What are the market equilibrium rental price per month and the market equilibrium number of apartements demanded and supplied.
b. If the local government can enfore a rent control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage? Of how many units? And how many unit will actually be rented each month?
c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus of a shortgage? Of how many units? And how many units will actually be rented each month?
d. Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming that demand remains unchanged, by how many units of housing would the government have to increase the supply of housing in order to get the market equilibrium rental price to fall to $1500 per month. To $1000 per month? To $500 per month?