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2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (1) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price seiling,

2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (1) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price seiling,

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter4: The Market Forces Of Supply And Demand
Section: Chapter Questions
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2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (i) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price ceiling. (d) Calculate the dollar value of the producer surplus after the imposition of the price ceiling. Show your work. (e) Explain why the imposition of the price ceiling does not result in a deadweight loss.
Transcribed Image Text:2. The market for apartments in the town of Westville is currently in equilibrium, and consumers are renting 700 apartments at a price of $1,000 per apartment. (a) Assuming that the supply of apartments is perfectly inelastic, draw a correctly labeled graph for the apartment market and label the equilibrium price and quantity using the values above. (b) Now assume the government imposes a price (rent) ceiling of $800 for an apartment. On your graph in part (a), show the following. (i) The price ceiling at $800 (ii) The quantity demanded, labeled as Qa (iii) The quantity supplied, labeled as Q, (c) On your graph, shade completely the area representing the consumer surplus after the imposition of the price ceiling. (d) Calculate the dollar value of the producer surplus after the imposition of the price ceiling. Show your work. (e) Explain why the imposition of the price ceiling does not result in a deadweight loss.
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