Question

QUESTION.

Suppose the monthly demand and supply for rental housing in the city of Avalon is given in the

table below:

1. Draw the supply and demand curves and identify the equilibrium price of housing? At this equilibrium, how many units of housing are bought and sold each month?

2. Suppose that the population of Avalon increases, increasing the

demand for housing by 50 units across the board. Indicate the new demand

schedule in the table above. What is the new equilibrium price and quantity

of housing?

3. Has there been a shift in, or a movement along, the supply curve for housing? Explain and show on your graph.

Monthly

Price                            Quantity

                                    Demanded      Quantity

                                                            Supplied         

$150                            200                  0

200                              180                  30

250                              160                  60

300                              140                  90

350                              120                  120

400                              90                    140

450                              70                    160

500                              60                    180

550                              40                    200

Answer 1

1.

Monthly price ($)	Quantity Demanded	Quantity supplied
150	200	0
200	180	30
250	160	60
300	140	90
350	120	120
400	90	140
450	70	160
500	60	180
550	40	200

Equilibrium price = $350

Equilibrium quantity = 120 units of housing

Above figures are identified from the graph and the tabular data.

2.

New demand schedule as stated in the question is as follows:

Monthly price ($)	Quantity Demanded	New quantity demanded	Quantity supplied
150	200	250	0
200	180	230	30
250	160	210	60
300	140	190	90
350	120	170	120
400	90	140	140
450	70	120	160
500	60	110	180
550	40	90	200

At the new demand level,

Equilibrium price = $400

Equilibrium quantity = 140 units of housing

3.

There is a rightward shift in demand and movement along the curve in case of supply with the given data.