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The graph below shows the market for apartments in a local city. Price $2500 $2000 $1500 $1000 $500 DID (b) There is an a b d 0 1 2 Local Housing Market 1 1 3 6 4 5 Quantity (Hundreds of Apartments) A local municipal government decides that the rent for apartments in the city is too high. As a result they institute a price ceiling, capping rent at $1000 per month. Use this information to complete the following statements (a) The price ceiling creates a while decreasing the quantity of apartments supplied to 7 Supply Demand 8 9 10 (c) According to the model, consumers AS A GROUP are made in the housing market since it increases the quantity of apartments demanded to in consumer surplus as before the price ceiling, consumer surplus was depicted as area(s) and after the price ceiling, consumer surplus was depicted as area(s)

The graph below shows the market for apartments in a local city. Price $2500 $2000 $1500 $1000 $500 DID (b) There is an a b d 0 1 2 Local Housing Market 1 1 3 6 4 5 Quantity (Hundreds of Apartments) A local municipal government decides that the rent for apartments in the city is too high. As a result they institute a price ceiling, capping rent at $1000 per month. Use this information to complete the following statements (a) The price ceiling creates a while decreasing the quantity of apartments supplied to 7 Supply Demand 8 9 10 (c) According to the model, consumers AS A GROUP are made in the housing market since it increases the quantity of apartments demanded to in consumer surplus as before the price ceiling, consumer surplus was depicted as area(s) and after the price ceiling, consumer surplus was depicted as area(s)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Local Housing Market Analysis The following graph illustrates the market dynamics for apartments in a local city under the influence of a price ceiling. #### Graph Description: The vertical axis represents the "Price" in dollars while the horizontal axis indicates the "Quantity" in hundreds of apartments. The graph encompasses: - **Supply Line:** Upward sloping, representing the increase in quantity supplied as price rises. - **Demand Line:** Downward sloping, demonstrating the increase in quantity demanded as price decreases. - **Equilibrium Point:** Where supply equals demand. - **Price Ceiling:** Set at $1000 per month, shown by a dotted horizontal line. ##### Areas: - **Area a:** Above the equilibrium price line up to $2500. - **Area b:** Between the equilibrium price line ($1500) and the price ceiling ($1000). - **Area c:** From $1000 down to the next price level. - **Area d:** From $500 to $1000. - **Area e:** The triangle between the demand curve, price ceiling line, and equilibrium quantity line. - **Area f:** The triangle between the supply curve, price ceiling line, and equilibrium quantity line. #### Impact of Price Ceiling: A local municipal government institutes a price ceiling to limit the rent for apartments at $1000 per month. This measure is introduced with the intention of making housing more affordable. Using the graph, analyze the outcomes: **Statements to Complete Using the Graph:** (a) The price ceiling creates a (shortage/surplus) in the housing market since it increases the quantity of apartments demanded to (quantity) while decreasing the quantity of apartments supplied to (quantity). **Blank 1: shortage** **Blank 2: 7** **Blank 3: 2** (b) There is an (increase/decrease) in consumer surplus as before the price ceiling, consumer surplus was depicted as area(s) (region), and after the price ceiling, consumer surplus was depicted as area(s) (region). **Blank 1: increase** **Blank 2: a + b** **Blank 3: a + b + e** (c) According to the model, consumers AS A GROUP are made (better off/worse off). **Blank 1: better off** This exercise demonstrates the importance of understanding market equilibrium and the effects of government intervention in managing city housing markets.
Transcribed Image Text:### Local Housing Market Analysis The following graph illustrates the market dynamics for apartments in a local city under the influence of a price ceiling. #### Graph Description: The vertical axis represents the "Price" in dollars while the horizontal axis indicates the "Quantity" in hundreds of apartments. The graph encompasses: - **Supply Line:** Upward sloping, representing the increase in quantity supplied as price rises. - **Demand Line:** Downward sloping, demonstrating the increase in quantity demanded as price decreases. - **Equilibrium Point:** Where supply equals demand. - **Price Ceiling:** Set at $1000 per month, shown by a dotted horizontal line. ##### Areas: - **Area a:** Above the equilibrium price line up to $2500. - **Area b:** Between the equilibrium price line ($1500) and the price ceiling ($1000). - **Area c:** From $1000 down to the next price level. - **Area d:** From $500 to $1000. - **Area e:** The triangle between the demand curve, price ceiling line, and equilibrium quantity line. - **Area f:** The triangle between the supply curve, price ceiling line, and equilibrium quantity line. #### Impact of Price Ceiling: A local municipal government institutes a price ceiling to limit the rent for apartments at $1000 per month. This measure is introduced with the intention of making housing more affordable. Using the graph, analyze the outcomes: **Statements to Complete Using the Graph:** (a) The price ceiling creates a (shortage/surplus) in the housing market since it increases the quantity of apartments demanded to (quantity) while decreasing the quantity of apartments supplied to (quantity). **Blank 1: shortage** **Blank 2: 7** **Blank 3: 2** (b) There is an (increase/decrease) in consumer surplus as before the price ceiling, consumer surplus was depicted as area(s) (region), and after the price ceiling, consumer surplus was depicted as area(s) (region). **Blank 1: increase** **Blank 2: a + b** **Blank 3: a + b + e** (c) According to the model, consumers AS A GROUP are made (better off/worse off). **Blank 1: better off** This exercise demonstrates the importance of understanding market equilibrium and the effects of government intervention in managing city housing markets.
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