1. Suppose the demand for and supply of one-bedroom housing units in Nairobi’s Westlands area can be represented by the following linear functions: Qd =18,200–40P and Qs =–2,200+20P Where Qd, Qs = Number of housing units in thousands, P = Price in US dollars. a) Determine the market equilibrium price and quantity b) Suppose the government decides to subsidize the cost of construction one-bedroom houses in the area at US$20.00 per housing unit. Determine the equilibrium outcome after the subsidy, and show how the benefit is shared between tenants and landlords. How much will the subsidy cost the government? c) Graphically show your results using well labeled demand and supply curves
1. Suppose the
Qd =18,200–40P and Qs =–2,200+20P
Where Qd, Qs = Number of housing units in thousands, P =
a) Determine the
b) Suppose the government decides to subsidize the cost of construction one-bedroom houses in the area at US$20.00 per housing unit. Determine the equilibrium outcome after the subsidy, and show how the benefit is shared between tenants and landlords. How much will the subsidy cost
the government?
c) Graphically show your results using well labeled demand and supply
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