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2009Problem_Set_2

# 2009Problem_Set_2 - AEM 415 Price Analysis Fall Semester...

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AEM 415 Price Analysis Fall Semester 2009 Homework Assignment 2 This assignment is due at the beginning of class on Tuesday, 15 th of September 2009. Total 10 points. 1. Calculating equilibrium prices and quantities The market demand and supply for Ithaca farmland is given by the following functions: Q d = 4000 - 7P, and Q s = 9P, where: Q d is quantity demanded and Q s is quantity supplied, and P is the rental price of land per month. The Mayor and the County Executive are proposing separate rent control measures. The Mayor wants to prohibit landowners from charging farmers more than \$200 per month to rent farmland. The County Executive wants to prohibit landowners from charging more than \$400 per month. Based on the above information, answer the following questions: (a) Calculate the equilibrium price and quantity. (1 point) (b) If the Mayor's plan is adopted, what will that do to the demand for land? Explain and then illustrate with a graph. (1 point) (c) What effect would the county executive’s plan have on demand? (1 point)

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2009Problem_Set_2 - AEM 415 Price Analysis Fall Semester...

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