Question

In: Economics

Q1. The rent control agency of Pretoria city has found that aggregate demand is P =20...

Q1. The rent control agency of Pretoria city has found that aggregate demand is P =20 – 0.125Qd. Quantity is measured in tens of thousands of apartments. Price, the average monthly rental rate, is measured in hundreds of Dollars. The agency has also noted that the increase in Q at lower P results from more three-person families coming into the city from Livingstone and demanding apartments. The city’s board of realtors acknowledges that this is a good demand estimate and has shown that supply is Q S = 70 + 7 P.

A. If both the agency and the board are right about demand and supply, what is the free market price, quantity and show your answer graphically? (20marks)

B. What is the change in city population if the agency sets a maximum average monthly rent (price ceiling) of $300 and all those who cannot find an apartment leave the city?

C. Suppose the agency bows to the wishes of the board and sets a rental of $900 per month on all apartments to allow landlords a “fair” rate of return. If 50% of any long-run increases in apartment offerings come from new construction, how many apartments are constructed? (15marks)

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

why would the government of a city in impose rent control? is rent control a good...
why would the government of a city in impose rent control? is rent control a good or or not so good idea?
Consider a country with the following aggregate demand curve for cars.Q = 2000 – 20.P There...
Consider a country with the following aggregate demand curve for cars.Q = 2000 – 20.P There is a industry with following marginal and average cost curves. MC = 10 + 0.01 QAC = 10 + 0.005Q Assume that the industry is a monopoly and there is no free trade. a. What is the monopolist’s marginal revenue curve? (Hint: Express demand curve as P = A – B.Q form, and estimate MR) b. What is the monopolist’s profit maximizing output? c....
Aggregate Demand and Aggregate Supply Assume Broncoland has the following aggregate demand (AD) and short-run aggregate...
Aggregate Demand and Aggregate Supply Assume Broncoland has the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Price Level Aggregate Demand Short-Run Aggregate Supply 120 8250 9700 115 8300 9750 110 8400 9700 105 8500 9600 100 8600 9500 95 8700 9300 90 8800 8800 85 8900 8000 80 9100 7000 Return to the original values of aggregate demand and short-run aggregate supply. Assume the long-run full-employment level of output (often called either potential GDP or the natural...
1 point) A company has found that the relationship between the price p and the demand...
1 point) A company has found that the relationship between the price p and the demand x for a particular product is given approximately by p=1281−0.17x2. The company also knows that the cost of producing the product is given by C(x)=870+398x. Find P(x), the profit function. P(x) = Now use the profit function to do the following: (A) Find the average of the x values of all local maxima of P. Note: If there are no local maxima, enter -1000....
The demand function in a duopoly is: P = 100 – 2(Q1 + Q2). If the...
The demand function in a duopoly is: P = 100 – 2(Q1 + Q2). If the first firm decides to sell 10 units while the second firm sells 20 units, which of the following will be true? The second firm will earn twice as much revenue as the first firm. The second firm will sell at a lower price than the first firm. An increase in one firm’s output will not affect the other firm’s revenue. The first firm will...
A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N...
A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N greater than or equal to 1 firms in this market, and the marginal cost for each firm i was a constant ci. Suppose firms in this market compete choosing the level of output, and marginal cost is the same across firms. ci=30. What is each firm's profit in equilibrium?
A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N...
A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N greater than or equal to 1 firms in this market, and the marginal cost for each firm i was a constant ci. Suppose firms in this market compete choosing the level of output, and marginal cost is the same across firms. ci=30. What will be the market price if N=4?
A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N...
A market has the demand Q=200-P in which Q=qi was the aggregate quantity. There were N greater than or equal to 1 firms in this market, and the marginal cost for each firm i was a constant ci. Suppose firms in this market compete choosing the level of output, and marginal cost is the same across firms. ci=30. What will be each firm's profit in equilibrium if N=4?
Suppose that the inverse demand function is described by, P = 60-4(q1 +q2), where q1 is...
Suppose that the inverse demand function is described by, P = 60-4(q1 +q2), where q1 is the output of the incumbent firm and q2 is the output of the entrant. Let the labor cost per unit w = 6 and capital cost per unit be r = 6. In addition, each firm has a fixed setup cost of f. (a) Suppose that in stage one the incumbent invests in capacity K1. Find the incum- bentís and entrantís best response functions...
New York City started using rent control after WWII in an effort to create affordable housing....
New York City started using rent control after WWII in an effort to create affordable housing. New York City is known for high rents for everyone not receiving rent control, and for the small size of the majority of apartments. How has New York City’s policy of rent control created these conditions? Should cities institute rent controls to help lower-income households afford housing?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT