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# Assignment1ans - ASSIGNMENT 1 Economics 203 Fall 2011 Due...

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ASSIGNMENT 1 Economics 203 – Fall 2011 Due: 4:00pm Oct 11 th , 2011 in the Econ 203 assignment box. The assignment is out of 100 marks and counts towards 9% of your final grade. If you work with others, please indicate their names in the top right-hand corner of your assignment (you will not be penalized). In any event, write up the work on your own. Copying will be considered cheating . Section 1: Supply and Demand. Question 1 (20 marks): The demand and supply for apartments in Victoria are given by the following equation (Demand) P = 900 – Q and (Supply) P = 2Q. a) Compute the equilibrium price, quantity (of apartments) traded, consumer and producer surplus in Victoria. Set Demand = Suppy and solve for: P* = 600, Q*=300 . CS = (900 - 600)*300/2 = 45000. PS = (600)*300/2=90000. b) The government imposes rent control at P = \$400. Compute the excess demand if exists When P = \$400, quantity demanded = 500 and quantity supplied = 200. Excess demand 500 – 200 = 300. c) Suppose now that there is a shift in supply for apartments. The new supply curve becomes P = Q. Compute the new excess demand and the deadweight loss associated with a rent control of P = \$400. Under the new supply curve, the equilibrium quantity and price without rent control are: P* = 450, Q*=450 . With rent control of P = \$400, quantity demanded = 500 and quantity supplied = 400. Excess demand 500 – 400 = 100. DWL = (500-400)*(450-400)/2 = 2500. d) Identify

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Assignment1ans - ASSIGNMENT 1 Economics 203 Fall 2011 Due...

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