Question

In most cities, land suitable for apartments is limited. Suppose Amazon decides to set up a second headquarters in a city with limited land for apartments. The apartment market in the city is in long-run equilibrium before Amazon’s decision, but the decision causes the demand for apartments to rise. Explain the sequence of events and the time path of apartment rents as the market moves first toward a new short-run equilibrium, and then toward a new long-run equilibrium. Please explain thank you in advance

Answer 1

Globally land is limited in each city . Even if the apartment market is in equilibrium before launch for a second headquarters by Amazon, the effect is going to be high boom in the economy. The apartment rent market will increase tremendously when a retail giant comes to town . Also there is going to be a hike in the real estate. The planners, elected officials in the city will be doing everything to hold on the Amazon Online retailers team to launch its second headquarters offering tax breaks as well as effective transportation assisting the business tycoon. This can be of immense job opportunity for the people there both online and offline. But the negative side is that this short run boom will affect the prospective buyers and rent takers as the residents seeking for a affordable home will find the price soaring for homes, apartments and buildings. This will increase the market boom to slowly get in to equilibrium in the short run and eventually the apartment market will get its demand and supply in the long run on a later period as it will be influenced and a prominent place for home dwellers with the Online giant in town.

In neoclassical financial aspects, equilibrium exists when flexibly rises to interest for a specific item.

the long run is a hypothetical idea wherein all business sectors are in equilibrium, and all costs and amounts have completely changed and are in equilibrium. The long run appears differently in relation to the short run, in which there are a few limitations and markets are not completely in equilibrium.

The short run is a timeframe in which the firm can shift its yield by changing the variable elements of creation so as to procure greatest benefits or to acquire least misfortunes. The quantity of firms in the business is fixed on the grounds that neither the current firms can leave nor new firms can enter it.

Over the long haul, it is conceivable to make a bigger number of changes than in the short-run. The firm can change its plant limit and size of activities to the changed conditions. Thusly, all expenses are vari­able. Firms must acquire just typical benefits. On the off chance that the cost is over the long-run AC bend firms will procure supernormal benefits.