As you can see from the article in the prior problem, "Rents Hit All-Time Highs amid Job Growth and Low Vacancy Rates," some peoplemove out as a result of rent increases, while others are ready to pay an even higher rent. Rent control adds yet another aspect bysetting a ceiling on what the rental price can ultimately rise to. The supply and demand model can be used to illustrate the mechanismthat leads to all these different market outcomes.Consider the market for rental properties in Los Angeles and Orange counties in Southern California. Suppose that while averageearnings increased by about 10% in Los Angeles and Orange counties, the average rent has increased by 20%. (Assume for a momentthat there are no rent control regulations.)Adjust the following graph to illustrate the rent increase by either using the black point (cross symbol) or by shifting the supply and demaraHint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve.(?)The Market for Rental Properties in Los Angeles and Orange CountiesRENTAL PRICE (Dollars per month)200018001000140012001000800600400200100100SupplyDemand800 900 1000000 700500400200 300QUANTITY (Number of vacant units)ODemandCSupply+New RentVacancies Demanded with Price ControlDVacancies Supplied with Price ControlD RENTAL PRICE (Dotars)100050000040020000Demand100 200 300 400 500 600 700 800 900 1000QUANTITY (Number of vacant units)܀As a result of the 20% rent increase, the number of vacant units demandedThe increase in earnings results in a new equilibrium rent of 5units.New Rent*Vacancies Demanded with Price ControlVacancies Supplied with Price ControltoAdjust the previous graph to show the effect of the increase in earnings.Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve.units.per month and a new equilibrium number of vacancies ofNow suppose that the state of California Introduces rent control by setting the maximum rent at $1,200 per month.On the previous graph, use the grey point (star symbol) to indicate the number of vacances demanded. Then use the tan point (dash symbol) toindicate the number of vacancies supplied.As a result of rent control, there is avacant units in the market.Grade It NowSave & ContinueContinue without saving

Average increase in earnings in LA and Orange counties: 10%Average increase in rent in LA and Orange…

RENTAL PRICE (Dota 1000 100 600 400 200 D Demand O 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Number of vacant units) As a result of the 20% rent increase, the number of vacant units demanded The increase in earnings results in a new equilibrium rent of 5 units. New Rent * Vacancies Demanded with Price Control Vacancies Supplied with Price Control As a result of rent control, there is a to Adjust the previous graph to show the effect of the increase in earnings. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. per month and a new equilibrium number of vacancies of units. Now suppose that the state of California introduces rent control by setting the maximum rent at $1,200 per month. On the previous graph, use the grey point (star symbol) to indicate the number of vacances demanded. Then use the tan point (dash sym indicate the number of vacancies supplied. vacant units in the market.

RENTAL PRICE (Dota 1000 100 600 400 200 D Demand O 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Number of vacant units) As a result of the 20% rent increase, the number of vacant units demanded The increase in earnings results in a new equilibrium rent of 5 units. New Rent * Vacancies Demanded with Price Control Vacancies Supplied with Price Control As a result of rent control, there is a to Adjust the previous graph to show the effect of the increase in earnings. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. per month and a new equilibrium number of vacancies of units. Now suppose that the state of California introduces rent control by setting the maximum rent at $1,200 per month. On the previous graph, use the grey point (star symbol) to indicate the number of vacances demanded. Then use the tan point (dash sym indicate the number of vacancies supplied. vacant units in the market.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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