Housing policy analysts debate the best way to increase the number of housing units available to low-income households. One strategy-the demand-side strategy is to provide people with housing vouchers, paid for by the government, which can be used to rent housing supplied by the private market. Another-a supply-side strategy-is to have the government subsidize housing suppliers or to build public housing. Using the line drawing tool, draw a single line to show the effect of a supply-side strategy. Properly label your line. Carefully follow the instructions above and only draw the required object. Rent ($) Market for Housing Quantity So •Do

Suppose that in 2007 Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2008, 600,000 Mustangs were sold at an average price of $19,500 per car. From these statements what changes in supply or demand on the market for Mustangs produced such changes in equilibrium? (One graph. Start by plotting two points (price versus quantity, shift either supply or demand, not both) and then draw supply and demand graphs through them in a way that explains the change in the equilibrium from 2007 to 2008.

Draw a model: Consider the market for corn. Suppose that right now, the equilibrium price is considered “too low” by farmers (i.e. suppliers) in order to make a living. These farmers go to their state representatives and convince them to enact a price floor that is above the equilibrium price. Depict this situation graphically. Is there a shortage or a surplus (or does nothing happen)? Now, conceptually, describe how we know with certainty, that consumers are harmed by this policy. Then, describe conceptually how farmers may be harmed or may benefit from this policy. Graphically depict how we know that consumers are harmed while farmers may be better or worse off (ambiguous). If we were to consider the “total surplus” of consumers and farmers, can we say with certainty whether this economy is better or worse off from the price floor?

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