As you can see from the article in the prior problem, "Rents Hit All-Time Highs amid Job Growth and Low Vacancy Rates," some people move out as a result of rent increases, while others are ready to pay an even higher rent. Rent control adds yet another aspect by setting a ceiling on what the rental price can ultimately rise to. The supply and demand model can be used to illustrate the mechanism that leads to all these different market outcomes. Consider the market for rental properties in Los Angeles and Orange counties in Southern California. Suppose that while average earnings increased by about 10% in Los Angeles and Orange counties, the average rent has increased by 20%. (Assume for a moment that there are no rent control regulations.) Adjust the following graph to illustrate the rent increase by either using the black point (cross symbol) or by shifting the supply and demand curves. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. Adjust the following graph to illustrate the rent increase by either using the black point (cross symbol) or by shifting the supply and demand cu Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. RENTAL PRICE (Dollars per month) The Market for Rental Properties in Los Angeles and Orange Counties 3000 2700 2400 2100 1800 1500 1200 900 600 300 Supply Demand 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Number of vacant units) As a result of the 20% rent increase, the number of vacant units demanded The increase in earnings results in a new equilibrium rent of $ units. As a result of rent control, there is a O Demand shortage Supply of New Rent Vacancies Demanded with Price Control * Vacancies Supplied with Price Control decreases increases 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. to (?) Now suppose that the state of California introduces rent control by setting the maximum rent at $1,800 per month. units. On the previous graph, use the grey surplus symbol) to indicate the number of vacancies demanded. Then use the tan point (dash symbol) to indicate the number of vacancies sup per month and a new equilibrium number of vacancies of vacant units in the market.