As you can see from the article in the prior problem, "Rents Hit All-Time Highs amid JobGrowth and Low Vacancy Rates," some people move out as a result of rent increases, whileothers are ready to pay an even higher rent. Rent control adds yet another aspect bysetting a ceiling on what the rental price can ultimately rise to. The supply and demandmodel can be used to illustrate the mechanism that leads to all these different marketoutcomes.Consider the market for rental properties in Los Angeles and Orange counties in SouthernCalifornia. Suppose that while average earnings increased by about 10% in Los Angelesand Orange counties, the average rent has increased by 20%. (Assume for a moment thatthere are no rent control regulations.)Adjust the following graph to illustrate the rent increase by either using the black point (crosssymbol) or by shifting the supply and demand curves.Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movementalong the demand/supply curve.RENTAL PRICE (Dollars per month)Rental Properties in Los Angeles and Orange Counties200016001600140012001000800GOO40020000SupplyDemand100 200 300 400 500 600 700 800 900 1000QUANTITY (Number of vacant units)DemandSupplyNew RentVacancies Demanded with Price ControlVacancies Supplied with Price ControlAs a result of the 20% rent increase, the number of vacant units demandedunits.8 Adjust the previous graph to show the effect of the increase in earnings.Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movementalong the demand/supply curve.The increase in earnings results in a new equilibrium rent of $new equilibrium number of vacancies ofunits.Now suppose that the state of California introduces rent control by setting the maximumrent at $1,200 per month.per month and aOn the previous graph, use the grey point (star symbol) to indicate the number of vacanciesdemanded. Then use the tan point (dash symbol) to indicate the number of vacancies supplied.As a result of rent control, there is aofvacant units in the market.

Average increase in earnings in LA and Orange counties: 10%Average increase in rent in LA and Orange…

Adjust the previous graph to show the effect of the increase in earnings. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. The increase in earnings results in a new equilibrium rent of $ new equilibrium number of vacancies of units. Now suppose that the state of California introduces rent control by setting the maximum rent at $1,200 per month. per month and a On the previous graph, use the grey point (star symbol) to indicate the number of vacancies demanded. Then use the tan point (dash symbol) to indicate the number of vacancies supplied. As a result of rent control, there is a of vacant units in the market.

Adjust the previous graph to show the effect of the increase in earnings. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. The increase in earnings results in a new equilibrium rent of $ new equilibrium number of vacancies of units. Now suppose that the state of California introduces rent control by setting the maximum rent at $1,200 per month. per month and a On the previous graph, use the grey point (star symbol) to indicate the number of vacancies demanded. Then use the tan point (dash symbol) to indicate the number of vacancies supplied. As a result of rent control, there is a of vacant units in the market.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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