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3. Suppose that the Council is concerned that landlords will allow the quality of their rental units to deteriorate following the imposition of the ceiling price. What can you infer about the level of quality that landlords' provision will allow if consumers are worse off, following the imposition of the ceiling price? Provide a

3. Suppose that the Council is concerned that landlords will allow the quality of their rental units to deteriorate following the imposition of the ceiling price. What can you infer about the level of quality that landlords' provision will allow if consumers are worse off, following the imposition of the ceiling price? Provide a

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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l Verizon 10:55 PM ncuone.ncu.edu Instructions Assume that the City Council in Prescott, Arizona is considering implementing price ceilings on rental units based on the number of bedrooms in the unit. The demand function for rental units (on a single bedroom equivalent basis) is given by Qp = 120 – 4P and the supply function is given by Qs = 2P, where P is price and Q is quantity. The Council is considering imposing a ceiling price on rental units of Pmax = 16. 1. Using the given functions, draw a corresponding demand curve and a supply curve. Properly label the equilibrium price and quantity. Then show what will happen to equilibrium if the City Council imposes a price ceiling at 16. NOTE: There are numerous guides online that demonstrate how to draw supply and demand curves; most are done in Excel. To create the demand curves that you need for this assignment, create an Excel file with a price column, including prices from $1 to $30. Using the formulas, compute the quantity demanded at each price and quantity supplied for each price. Then copy and paste the graph into your Word document where you will write out
Transcribed Image Text:l Verizon 10:55 PM ncuone.ncu.edu Instructions Assume that the City Council in Prescott, Arizona is considering implementing price ceilings on rental units based on the number of bedrooms in the unit. The demand function for rental units (on a single bedroom equivalent basis) is given by Qp = 120 – 4P and the supply function is given by Qs = 2P, where P is price and Q is quantity. The Council is considering imposing a ceiling price on rental units of Pmax = 16. 1. Using the given functions, draw a corresponding demand curve and a supply curve. Properly label the equilibrium price and quantity. Then show what will happen to equilibrium if the City Council imposes a price ceiling at 16. NOTE: There are numerous guides online that demonstrate how to draw supply and demand curves; most are done in Excel. To create the demand curves that you need for this assignment, create an Excel file with a price column, including prices from $1 to $30. Using the formulas, compute the quantity demanded at each price and quantity supplied for each price. Then copy and paste the graph into your Word document where you will write out
l Verizon 10:56 PM ncuone.ncu.edu answers to the following questions. 2. Are consumers of rental-housing in Prescott well-served by this price ceiling policy? Provide a careful economic analysis in support of your claim. In particular, discuss what happens if a regulated price is set that is not equal to the equilibrium price. 3. Suppose that the Council is concerned that landlords will allow the quality of their rental units to deteriorate following the imposition of the ceiling price. What can you infer about the level of quality that landlords' provision will allow if consumers are worse off, following the imposition of the ceiling price? Provide a careful economic analysis in support of your claim. Suppose now that the proposal before the City Council contemplates imposing a price 4. ceiling on apartment rentals, but not on house rentals. Would owners of rental houses in Prescott be likely to support this proposal, or would they prefer the status quo (i.e., no price ceilings)? Provide the economic rationale for your answer. (In answering this question, you should ignore all supply-side considerations. In other words, just assume that supply adjusts fully to accommodate demand.)
Transcribed Image Text:l Verizon 10:56 PM ncuone.ncu.edu answers to the following questions. 2. Are consumers of rental-housing in Prescott well-served by this price ceiling policy? Provide a careful economic analysis in support of your claim. In particular, discuss what happens if a regulated price is set that is not equal to the equilibrium price. 3. Suppose that the Council is concerned that landlords will allow the quality of their rental units to deteriorate following the imposition of the ceiling price. What can you infer about the level of quality that landlords' provision will allow if consumers are worse off, following the imposition of the ceiling price? Provide a careful economic analysis in support of your claim. Suppose now that the proposal before the City Council contemplates imposing a price 4. ceiling on apartment rentals, but not on house rentals. Would owners of rental houses in Prescott be likely to support this proposal, or would they prefer the status quo (i.e., no price ceilings)? Provide the economic rationale for your answer. (In answering this question, you should ignore all supply-side considerations. In other words, just assume that supply adjusts fully to accommodate demand.)
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