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ch9_p1 - a Calculate the equilibrium price and quantity...

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9_1. The elected officials in a west coast university town are concerned about the "exploitative" rents being charged to college students. The town council is contemplating the imposition of a $350 per month rent ceiling on apartments in the city. An economist at the university estimates the demand and supply curves as: Q D = 5600 - 8P Q S = 500 + 4P, where P = monthly rent, and Q = number of apartments available for rent. For purposes of this analysis, apartments can be treated as identical.
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Unformatted text preview: a. Calculate the equilibrium price and quantity that would prevail without the price ceiling. Calculate producer and consumer surplus at this equilibrium (sketch a diagram showing both). b. What quantity will eventually be available if the rent ceiling is imposed? Calculate any gains or losses in consumer and/or producer surplus. c. Does the proposed rent ceiling result in net welfare gains? Would you advise the town council to implement the policy?...
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