**Transcription of Educational Content on Rent Control:**Rent control is common in some cities, particularly in the United States. You will have noticed some of the consequences in movies or TV shows, usually police stories set in the high-rise areas of New York City, for example. Suppose you have been given the following information about the market for rental housing in Winona:| Rent (dollars per month) | Quantity Demanded | Quantity Supplied ||--------------------------|-------------------|-------------------|| $500 | 20,000 | 10,000 || $550 | 15,000 | 10,000 || $600 | 10,000 | 10,000 || $650 | 5,000 | 10,000 || $700 | 2,500 | 10,000 || $750 | 1,500 | 10,000 || $800 | 1,000 | 10,000 |**a) What is the equilibrium rent?**The equilibrium rent is $600.**b) What is the equilibrium quantity of rented housing?**The equilibrium quantity of rented housing is 10,000 units.Now suppose that a rent ceiling of $700 is imposed in the housing market for Winona.**c) What is the quantity of housing demanded?**The quantity of housing demanded at a rent ceiling of $700 is 2,500 units.**d) What is the quantity of housing supplied?**The quantity of housing supplied at a rent ceiling of $700 is 10,000 units.**e) Is there excess demand for or excess supply of housing with the imposition of a rent ceiling? Explain what is happening in the market for rental housing in Winona.**With the imposition of a rent ceiling of $700, there is an excess supply of housing. The supply of 10,000 units exceeds the demand of 2,500 units. This means that 7,500 units remain unoccupied, leading to a surplus of rental units in the market.

Answered: Rent control is common in some cities,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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**Transcription of Educational Content on Rent Control:**

Rent control is common in some cities, particularly in the United States. You will have noticed some of the consequences in movies or TV shows, usually police stories set in the high-rise areas of New York City, for example. Suppose you have been given the following information about the market for rental housing in Winona:

| Rent (dollars per month) | Quantity Demanded | Quantity Supplied |
|--------------------------|-------------------|-------------------|
| $500 | 20,000 | 10,000 |
| $550 | 15,000 | 10,000 |
| $600 | 10,000 | 10,000 |
| $650 | 5,000 | 10,000 |
| $700 | 2,500 | 10,000 |
| $750 | 1,500 | 10,000 |
| $800 | 1,000 | 10,000 |

**a) What is the equilibrium rent?**

The equilibrium rent is $600.

**b) What is the equilibrium quantity of rented housing?**

The equilibrium quantity of rented housing is 10,000 units.

Now suppose that a rent ceiling of $700 is imposed in the housing market for Winona.

**c) What is the quantity of housing demanded?**

The quantity of housing demanded at a rent ceiling of $700 is 2,500 units.

**d) What is the quantity of housing supplied?**

The quantity of housing supplied at a rent ceiling of $700 is 10,000 units.

**e) Is there excess demand for or excess supply of housing with the imposition of a rent ceiling? Explain what is happening in the market for rental housing in Winona.**

With the imposition of a rent ceiling of $700, there is an excess supply of housing. The supply of 10,000 units exceeds the demand of 2,500 units. This means that 7,500 units remain unoccupied, leading to a surplus of rental units in the market.

Expert Solution

Step 1

At Equilibrium Price, quantity demanded is equal to quantity supplied. There is no shortage or surplus and economy is stable at the state of equilibrium.

Shortage occurs when quantity demanded exceeds quantity supplied. Surplus occurs when quantity supplied exceeds quantity demanded.

Rent control is a price control mandated by government. It is a kind of price ceiling in which government specifies the maximum price or rent that a landlord can charge from tenant for residential housing. The main purpose is to prevent the houses from becoming too expensive such that it may become difficult for common people to afford them. In order for the rent control to be binding, the government should set the rent to be charged below the equilibrium level.

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