Question 3: Suppose the demand for new and old apartments (together) is given by QD(P)=200- 0.1P. The supply curve for old apartments is Qs (P)=30+0.03P. The supply curve for newly built apartments is QsN(P)=20+0.02P. (a) Determine the equilibrium price P, and how many apartments are built. (b) Now suppose that the city government decides to control rents. That is, no landlord is allowed to ask for a rent that exceeds 600 Dollars. How many new apartments are being built now? Suppose that everyone who cannot find an apartment leaves the city. How many people will leave? (c) Now suppose that instead of rent control, the government chooses to subsidize the building of new apartments. That is, the government pays 400 Dollars to landlords of any newly built apartments. Thus, the supply of new apartment is now given by 20+0.02(P+400). Determine the new equilibrium price P. Determine how many new apartments are built now and compute the total subsidy paid by the city government

Question 3: Suppose the demand for new and old apartments (together) is given by QD(P)=200- 0.1P. The supply curve for old apartments is Qs (P)=30+0.03P. The supply curve for newly built apartments is QsN(P)=20+0.02P. (a) Determine the equilibrium price P, and how many apartments are built. (b) Now suppose that the city government decides to control rents. That is, no landlord is allowed to ask for a rent that exceeds 600 Dollars. How many new apartments are being built now? Suppose that everyone who cannot find an apartment leaves the city. How many people will leave? (c) Now suppose that instead of rent control, the government chooses to subsidize the building of new apartments. That is, the government pays 400 Dollars to landlords of any newly built apartments. Thus, the supply of new apartment is now given by 20+0.02(P+400). Determine the new equilibrium price P. Determine how many new apartments are built now and compute the total subsidy paid by the city government

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter3: Supply And Demand: Theory

Section: Chapter Questions

Problem 1QP

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