EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Chapter 6, Problem 2SP
To determine
Determine the value of
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Students have asked these similar questions
Some cities impose rent control laws, which are price
controls or limits on the price of rental
accommodations (apartments, houses, and
mobile homes). New York City alone had over two
million rent-controlled apartments in the early 1950s, but
only about 27,000 as of 2014. Show the effect of a rent
control law on the equilibrium rental price and the quantity
of N.Y. apartments. Show the amount of excess demand
on your supply-and-demand diagram.
Consider the market rental dwellings in New York
illustrated in the figure to the right. Suppose the maximum
rent with New York's laws is p.
1.) Using the point drawing tool, indicate the quantity of
rental dwellings demanded and the market rent with the
rent control laws. Label this point 'ed.'
2.) Using the point drawing tool, indicate the quantity of
rental dwellings supplied and the market rent with the rent
control laws. Label this point 'es.'
Carefully follow the instructions above, and only draw the
required objects.
P, rent
Q
Q, quantity…
Suppose the following graph shows the demand for, and supply of, apartments in New York City.
Use the black point (plus symbol) to indicate the equilibrium monthly rent and quantity of apartments in the absence of price controls. Then use the
green point (triangle symbol) to fill the area representing consumers' surplus, and use the purple point (diamond symbol) to fill the area representing
producers' surplus.
MONTHLY RENT (Dollars per apartment)
2800
2600
2400
2200
2000
1800
0
Demand
Supply
0.8
3.2
QUANTITY OF APARTMENTS (Millions per month)
1.6
2.4
4.0
Equilibrium
A
CS
PS
?
Rent control is common in some cities, particularly in the United States. You will
have noticed some of the consequences in movies or TV shows, usually police stories,
set in the high-rise areas of New York City, for example. Suppose you have been
given the following information about the market for rental housing in Winona:
Quantity Demanded
Rent (dollars per month)
$500
550
600
650
700
750
800
20,000
15,000
10,000
5,000
2,500
1,500
1,000
a) What is the equilibrium rent?
b) What is the equilibrium quantity of rented housing?
Quantity Supplied
10,000
10,000
10,000
10,000
10,000
10,000
10,000
Now suppose that a rent ceiling of $700 is imposed in the housing market for Winona.
c) What is the quantity of housing demanded?
d) What is the quantity of housing supplied?
e) Is there excess demand for or excess supply of housing with the imposition of a
rent ceiling? Explain what is happening in the market for rental housing market in
Winona.
Chapter 6 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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