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 outcomesConsider the market for rental properties in the Inland Empire in Southern California. Suppose that while employment increased by 22% in the Inland Empire, 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.RENTAL PRICE (Dollars per month)4000360032002800240020001600120080040000The Market for Rental Properties in the Inland Empire100SupplyDemand200 300 400 500 600 700 800 900 1000QUANTITY (Number of vacant units)Demand-As a result of the 20% rent increase, the number of vacant units demandedSupply+New RentVacancies Demanded with Price ControlVacancies Supplied with Price Controlto?units. As a result of the 20% rent increase, the number of vacant units demandedThe increase in jobs results in a new equilibrium rent of $Adjust the previous graph to show the effect of the increase in jobs.Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve.toAs a result of rent control, there is aunits.Now suppose that the state of California introduces rent control by setting the maximum rent at $2,400 per month.ofper month and a new equilibrium number of vacancies ofOn the previous graph, use the grey point (star symbol) to indicate the number of vacancies demanded. Then use the tan point (dash symbol) toindicate the number of vacancies supplied.vacant units in the market.units.

The supply curve represents the quantity of a good or service that suppliers are willing to offer at…

Answered: Rents Hit All-Time Highs amid Job…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 the Inland Empire in Southern California. Suppose that while employment increased by 22% in the Inland Empire, 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.
RENTAL PRICE (Dollars per month)
4000
3600
3200
2800
2400
2000
1600
1200
800
400
0
0
The Market for Rental Properties in the Inland Empire
100
Supply
Demand
200 300 400 500 600 700 800 900 1000
QUANTITY (Number of vacant units)
Demand
-
As a result of the 20% rent increase, the number of vacant units demanded
Supply
+
New Rent
Vacancies Demanded with Price Control
Vacancies Supplied with Price Control
to
?
units.

As a result of the 20% rent increase, the number of vacant units demanded
The increase in jobs results in a new equilibrium rent of $
Adjust the previous graph to show the effect of the increase in jobs.
Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve.
to
As a result of rent control, there is a
units.
Now suppose that the state of California introduces rent control by setting the maximum rent at $2,400 per month.
of
per month and a new equilibrium number of vacancies of
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.
vacant units in the market.
units.

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