ps2_2017.pdf - Problem set 2 Microeconomics 33001 Professor...

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Problem set 2 Microeconomics: 33001 Professor Rebecca Dizon-Ross 1. The rent control agency of Chicago has found that the aggregate demand for apart- ments, measured in tens of thousands of apartments, is Q D = 160 - 8 P . Price, which is the monthly rental rate, is measured in hundreds of dollars. The supply of apartments, in the same units, is Q S = 70 + 7 P (a) What is the free market price of apartments? How much will population change (assume two people per apartment) if the rent control agency sets a maximum average monthly rent of $300 and everyone who can’t find an apartment leaves the city? (b) What would you actually expect to happen in this case? Would everyone leave the city? What if this example was in New York: do you think the effects of rent control would be the same or different in the two places? Why? (1-2 paragraphs). 2. TRUE, FALSE, OR UNCERTAIN (and why): (a) Booth has decided to raise money for upkeep of the Harper Center through taxes on coffee in the cafeteria. The cafeteria currently sells 1000 cups a day, at a price
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