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Suppose That The Demand And Supply Schedules For Rental Apartments In The City Of Gotham

are as given in the table below. Monthly Rent Apartments Demanded Apartments Supplied $2500 10,000 15,000 2000 12,500 12,500 1500 15,000 10,000 1000 17,500 7500 500 20,000 5000 a. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied? b. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month? c. Suppose that a new government is elected that wants to keep out the poor. It declares that the minimum rent that can be charged is $2500 per month. If the government can enforce that price floor, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
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a. The market equilibrium price is determined by the relationship quantity supplied equals quantity demanded. To find the equilibrium price, we find the price where the quantities are equal, which occurs at the rent (price) of $2,000. The equilibrium quantity at this price is 12,500 apartments. b. If the government imposes a maximum rent of $1,500, the quantity of apartments supplied equals 10,000 and the quantity of apartments demanded equals 15,000. Thus, there is a shortage of 5,000 apartments (= 15,000 (demand) - 10,000 (supply)). The amount of apartments actually rented will be determined by supply here. There are only 10,000 available for rent, so only 10,000 will be rented c. If the government imposes a minimum rent of $2,500, the quantity of apartments supplied equals 15,000 and the quantity of apartments demanded equals 10,000. Thus, there is a surplus of 5,000 apartments (= 15,000 (supply) - 10,000 (demand)). The amount of apartments actually rented will be determined by demand here. There are only 10,000 households that want to rent, so only 10,000 will be rented.
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