In: Economics
4. New York Apartments. The market supply and
demand functions for apartment rentals in New York...
4. New York Apartments. The market supply and
demand functions for apartment rentals in New York are given as
follows: P=2500-Q and P=300+Q
where P is the monthly rent in $ and Q is the
number of apartments rented per month.
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- Which is demand, which is supply? Explain.
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- What is the equilibrium market price and quantity?
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- Measure of the benefits consumers and producers receive given
the equilibrium and show graphically.
The government is considering placing a price ceiling on
monthly rent which limits the amount that landlords can charge in
order to attract more people to the city. If they do proceed with
this, the price would be set at $1000.
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- What is the outcome of this price ceiling (excess
demand/shortage or excess supply/surplus and in what amount)? Show
your results graphically.
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- Do consumers benefit from the price ceiling? Do producers? What
is the loss in overall economic efficiency?
Assume that because of the price ceiling, quantity supplied
falls and quantity demanded rises, resulting in long lines and
waiting lists.
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- Knowing this who is more likely to stand in line: lawyers or
underemployed retail workers? Why? (Use economic terms.)
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- Markets abhor a disequilibrium. Over time, the market
will fully adjust to the price ceiling. What will happen to market
demand?
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- What is the new equilibrium price and quantity?
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- What is the total economic cost of obtaining an apartment with
a price ceiling? Graph it and provide numerical value.