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equilibrium price/output solution

The local government in a west Coast college town is concerned about a recent explosion in apartment rental rates for students and other low-income renters. To combat the problem, a proposal has been made to institute rent control that would place a $900 per month ceiling on apartment rental rates. Apartment supply and demand conditions in the local market are

Qs = -400+2P (Market Supply)
Qd=5600-4P (Market Demand)

Where Q is the number of apartments and P is monthly rent.

A. Graph and calculate the equilibrium price/output solution. How much consumer surplus,producer surplus, and social welfare is produced at this activity level?
B. Use the graph to help you algebraically determine the quantity demanded, quantity supplied, and shortage wih a $900 per month ceiling on apartment rental rates.
C. Use the graph to help you algebraically determine the amount of consumer and producer surplus with rent control.
D. Use the graph to help you algebraically determine the change in social welfare and deadweight loss in consumer surplus due to rent control.

Solution Preview

A. Graph and calculate the equilibrium price/output solution. How much consumer surplus,producer surplus, and social welfare is produced at this activity level?
From the graph, the two lines intersect clearly at P = 1000.
AT P = 1000, Q = -400+2*100 = 1600
Therfeore, the equilibrium quantity ...

Solution Summary

This job helps to find equilibrium price/output solution.

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