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In: Economics

PART II: DEMAND AND SUPPLY GRAPHICAL (25 Marks) The table below shows the demand and supply...

PART II: DEMAND AND SUPPLY GRAPHICAL

The table below shows the demand and supply for 1 bedroom apartments in Nanaimo.

Price per Month ( $ )	Demand	Supply	Price per Month ( $ )	Demand	Supply
400	5250	2250	600	4000	3500
440	5000	2500	640	3750	3750
480	4750	2750	680	3500	4000
520	4500	3000	720	3250	4250
560	4250	3250	760	3000	4500

Construct an accurate graphical model, on one graph, of price, demand, and supply.

Illustrate and state the equilibrium price and quantity. Graph paper required.

Choose a scale which will utilize the entire page.

Extend the demand curve to the axis and calculate the consumer surplus.

Due to an improved economy, the best climate in Canada, and a higher university population, the demand for apartments rises by 500 units at every price level. Illustrate this new situation on the graph you constructed in ( 1 ) above. Illustrate and state the new equilibrium price and quantity.

Calculate the new consumer surplus.

The higher rental prices create a protest movement to control rental prices. The City Council agrees and imposes a ceiling price of $560 per month. Illustrate this on your graph. State and illustrate the shortage created by the ceiling price based on info in

( 1 ) above
( 2 ) above

Make as per Canadian Standards. Thanks. No Plagiarism.

Expert Solution

The graph of supply and demand has been shown in figure 1

Equilibrium quantity is where the supply and demand curve intersects. Equilibrium quantity = 3750 units and equilibrium price = $640.

The extended curve has been plotted in figure 2

If the City Council imposes a price ceiling of $560 per month, the the price cannot go above $560. This is shown in figure 4

Therefore a price ceiling of $560 creates a shortage of (4250-3250) = 1000 units. This has been marked as shortage 1 in figure 4.

Therefore a price ceiling of $560 creates a shortage of (4750-3250) = 1500 units. This has been marked as shortage 2 in figure 4.

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Rahul Sunny answered 2 years ago

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