blackboard.learn xythos,prod/5a747c369adob/1373558?response-content-dispositic v
ID: 1136730 • Letter: B
Question
blackboard.learn xythos,prod/5a747c369adob/1373558?response-content-dispositic ven the following equations of rental supply and demand, if the overnment imitated rent control so the that maximum rent charged would $1000/month nswer the following questions: 0 a. What would non rent control equilibrium be? b. How many units would be supplied under rent control? c. How many units gained/lost in the market? d. What would be the surplus lshortage? e. Who would benefit? f. Who would lose and why? Ro=-34h +2100 Rs-Us-300 In equilibrin Up=Us DOLLExplanation / Answer
a) At equilibrium,
Ud = Us = U
Rd = Rs = R
-3/5 U +2100 = U - 300
2400 = 8/5 U
U = 5/8 * 2400 = 1500
R = 1500 - 300 = $1200 / unit
At equilibrium 1500 units will be supplied at a price of $1200/month
b) When rent is fixed at $1000 per month
1000 = Us - 300
Us = 1300 units
Therefore, under rent control, 1300 units will be sold.
c) The number of units lost in the market due to rent control is 1500 - 1300 = 200.
d) Amount of shortage = Decrease in quantity * Decrease in price = (1500-1200) * $(1200-1000) = $300 * 200 = $ 60000
e) The consumers will benefit due to lower rentals paid by them now. Earlier they paid $1200 per unit, now only $1000 per unit.
f) The suppliers would lose due to decrease in the amount of sales. The entire deficit of $60000 will be borne by the suppliers due to decrease in price and quantity.
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