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. RENTAL PRICE (Dollars per month) 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. 3000 2700 2400 2100 1800 1500 1200 900 600 300 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) Adjust the previous graph to show the effect of the increase in jobs. As a result of the 20% rent increase, the number of vacant units demanded Demand The increase in jobs results in a new equilibrium rent or $ units. Supply 4+ New Rent Vacancies Demanded with Price Control Vacancies Supplied with Price Control to units. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. per month and a new equilibrium number of vacancies of Now suppose that the state of California introduces rent control by setting the maximum rent at $1,800 per month.
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. RENTAL PRICE (Dollars per month) 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. 3000 2700 2400 2100 1800 1500 1200 900 600 300 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) Adjust the previous graph to show the effect of the increase in jobs. As a result of the 20% rent increase, the number of vacant units demanded Demand The increase in jobs results in a new equilibrium rent or $ units. Supply 4+ New Rent Vacancies Demanded with Price Control Vacancies Supplied with Price Control to units. Hint: Determine whether this scenario leads to a shift in the demand/supply curve or a movement along the demand/supply curve. per month and a new equilibrium number of vacancies of Now suppose that the state of California introduces rent control by setting the maximum rent at $1,800 per month.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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 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)
3000
2700
2400
2100
1800
1500
1200
900
600
300
0
The Market for Rental Properties in the Inland Empire
0 100
Supply
Demand
200 300
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 jobs results in a new equilibrium rent of $
units.
Demand
As a result of rent control, there is a
Supply
+
New Rent
Vacancies Demanded with Price Control
Vacancies Supplied with Price Contral
to
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.
units.
per month and a new equilibrium number of vacancies of
Now suppose that the state of California introduces rent control by setting the maximum rent at $1,800 per month.
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.
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