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2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (1) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price seiling,

2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (1) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price seiling,

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (i) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price ceiling. (d) Calculate the dollar value of the producer surplus after the imposition of the price ceiling. Show your work. (e) Explain why the imposition of the price ceiling does not result in a deadweight loss.
Transcribed Image Text:2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (i) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price ceiling. (d) Calculate the dollar value of the producer surplus after the imposition of the price ceiling. Show your work. (e) Explain why the imposition of the price ceiling does not result in a deadweight loss.
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