1.ThegovernmentofDubaihadbeenconcernedabouttherecentexplosioninapartmentrental r

Question

1.ThegovernmentofDubaihadbeenconcernedabouttherecentexplosioninapartmentrental ratesforlowincomefamilies.combatthisproblem,aproposalhasbeenmadetoinstituterentcontrolthatwouldplace$850permonthceilingonapartmentrentalrates.Apartmentsupplyand demandinthemarketareexpressedinthefollowingequations:

Qs = - 400 + 2P              Market Supply

Qd= 5,600 – 4P Market Demand

Where Q is the number of apartments and P is the rental rate

A.Calculate the equilibrium rental rate and the equilibrium apartments rented(10marks)

B. Determine the quantity demanded, quantity supplied, and shortage with a $ 850 per month ceiling price on apartment rental rates .

(Please Show the Calculations Typed in Details )

Explanation / Answer

Qd = 5,600 - 4P = -400 + 2P = Qs

5,600 + 400 = 2P + 4P

6P = 6,000

P = $1,000 (equlibrium)

Substituting P to get Q

Qd = 5,600 – (4x1000)

Q = 1,600. (equilibrium)

Quantity demanded and quantity supplied with $850 ceiling price.

Qd = 5,600 – (4x850)

Qd = 5,600 – 3400

Quantity demanded would be = 2,200

Qs = -400 + (2x850)

Quantity supplied would be 1,300

Shortage in supply = 2,200 – 1,300 = 900.

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