Suppose that the city of Los Angeles is debating between two policies intended to create more affordable 1-bedroom apartments. Currently the demand and supply of apartments is as follows: Quantity Supplied 26,000 24,000 22,000 20,000 18,000 16,000 Rent Quantity Demanded $1600 $1400 $1200 $1000 $800 $600 $400 16,000 18,000 20,000 22,000 24,000 26,000 a) The first policy being considered is instituting a maximum rental price of 1-bedroom apartments at $800. Sketch a graph of the market for 1-bedroom apartments in Los Angeles. Using either different colors or letters to label each of the areas, indicate the effects of the price limit by showing the consumer and producer surplus before and after the new policy as well as any deadweight loss. b) The second policy being considered is a subsidy to builders/suppliers of 1-bedroom apartments of $200 per month. Sketch a graph of the market for 1-bedroom apartments in Los Angeles and indicate the effects of the subsidy on the market. Be sure to show the consumer and producer surplus before and after the new policy as well as any price or quantity changes.

Suppose that the city of Los Angeles is debating between two policies intended to create more affordable 1-bedroom apartments. Currently the demand and supply of apartments is as follows: Quantity Supplied 26,000 24,000 22,000 20,000 18,000 16,000 Rent Quantity Demanded $1600 $1400 $1200 $1000 $800 $600 $400 16,000 18,000 20,000 22,000 24,000 26,000 a) The first policy being considered is instituting a maximum rental price of 1-bedroom apartments at $800. Sketch a graph of the market for 1-bedroom apartments in Los Angeles. Using either different colors or letters to label each of the areas, indicate the effects of the price limit by showing the consumer and producer surplus before and after the new policy as well as any deadweight loss. b) The second policy being considered is a subsidy to builders/suppliers of 1-bedroom apartments of $200 per month. Sketch a graph of the market for 1-bedroom apartments in Los Angeles and indicate the effects of the subsidy on the market. Be sure to show the consumer and producer surplus before and after the new policy as well as any price or quantity changes.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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