26) If the government imposes a maximum rent for housing that is above the equilibrium price, then you predict that A) the supply curve for housing shifts leftward. B) the law will generate a shortage of housing. C) the law will create a surplus of housing D) the law will have no effect in the market for housing. E) the demand curve for housing shifts rightward.
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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.
|
Rent |
Demand |
Supply |
|
2,500.00 |
10,000 |
15,000 |
|
2,000.00 |
12,500 |
12,500 |
|
1,500.00 |
15,000 |
10,000 |
|
1,000.00 |
17,500 |
7,500 |
|
500.00 |
20,000 |
5,000 |
1. What is the market equilibrium rental price per month and the market equilibrium number of apartments demanded and supplied?
2. If the local government can enforce a rent-control law that sets the maximum monthly rent at $1,500, will there be a surplus or a shortage? Of how many units? And how many units will actually be rented each month?
3. 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 $2,500 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?
4. Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming that demand remains unchanged, by how many units of housing would the government have to increase the supply of housing to get the market equilibrium rental price to fall to $1500 per month? To $1000 per month? To $500 per month?
Ā
