1
Problem Set for Lecture 13:
The “Short” and the “Long” of Rent Control Intervention
[January 12, 2010]
Note: Questions marked with a T may be discussed during tutorials
T13.1
“Nicolas looked at a straight line demand curve which intersected the price axis at 12 units
and the quantity demanded axis at 4 units.
On this straight line demand curve, Nicolas identifies
Point
A
, which has a quantity demanded value of 1 and a price value of 9 and
Point B
, which has
a quantity demanded value of 2 and a price value of 6.
Using the
arc formula
for price elasticity of demand, Nicolas determines that the price elasticity
of demand between Point A and Point B is minus 5/3 [
absolute value of 5/3
].
Nicolas concludes
that this demand curve is
elastic
for this arc.
Needles, Nicolas’ friend argues that he knew that result without using the arc formula calculations.
Why?
Needles said just use the total revenue definition of price elasticity of demand from Point
A to Point B.”
T13.2
“Nicole looks at a straight line demand curve which has a price intercept of 20 and a
quantity demanded intercept of 20.
Nicole knows that the slope for a straight line demand curve
is constant between any two points.
Using this information, Nicole concludes that the price
elasticity of demand must also be constant along all sections of this demand curve.” [
Hint
: Use
either the total revenue definition or the arc elasticity definition of price elasticity of demand
formula to answer this question.
T13.3
“Nina wonders why price elasticity of demand is far more important than price elasticity
of supply.”
13.4
“Nolan is curious about the difference between the “willingness to pay” concept and the
market equilibrium price: the price which all consumers have to pay.
Nolan argues that consumer
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 Spring '08
 Hare
 Supply And Demand, Nicolas, straight line demand, line demand curve, run production period

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