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As a result of the 20% rent increase, the number of vacant units demanded units. Adjust the previous graph to show the effect of the increase in earnings. The increase in earnings results in a new equilibrium rent of s | per month and a new equilibrium number of vacancies of |units. Now suppose that the state of California introduces rent control by setting the maximum rent at $2,400 per month. On the previous graph, use the grev point (star symbol) to indicate the number of vacancies demanded. Then use the tan point (dash svmbol) to

As a result of the 20% rent increase, the number of vacant units demanded units. Adjust the previous graph to show the effect of the increase in earnings. The increase in earnings results in a new equilibrium rent of s | per month and a new equilibrium number of vacancies of |units. Now suppose that the state of California introduces rent control by setting the maximum rent at $2,400 per month. On the previous graph, use the grev point (star symbol) to indicate the number of vacancies demanded. Then use the tan point (dash svmbol) to

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter4: Demand And Supply: Applications And Extensions
Section: Chapter Questions
Problem 2CQ
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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 Los Angeles and Orange counties in Southern California. Suppose that while average earnings increased by about 10% in Los Angeles and Orange counties, 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. The Market for Rental Properties in Los Angeles and Orange Counties 4000 3600 Supply Demand 3200 2800 2400 Supply 2000 1600 New Rent 1200 Demand 800 Vacancies Demanded with Price Control 400 100 200 300 400 500 600 700 800 900 1000 Vacancies Supplied with Price Control QUANTITY (Number of vacant units) RENTAL PRICE (Dollars per month)
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 Los Angeles and Orange counties in Southern California. Suppose that while average earnings increased by about 10% in Los Angeles and Orange counties, 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. The Market for Rental Properties in Los Angeles and Orange Counties 4000 3600 Supply Demand 3200 2800 2400 Supply 2000 1600 New Rent 1200 Demand 800 Vacancies Demanded with Price Control 400 100 200 300 400 500 600 700 800 900 1000 Vacancies Supplied with Price Control QUANTITY (Number of vacant units) RENTAL PRICE (Dollars per month)
As a result of the 20% rent increase, the number of vacant units demanded to units. Adjust the previous graph to show the effect of the increase in earnings. The increase in earnings results in a new equilibrium rent of S per month and a new equilibrium number of vacancies of units. Now suppose that the state of California introduces rent control by setting the maximum rent at $2,400 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. As a result of rent control, there is a vacant units in the market.
Transcribed Image Text:As a result of the 20% rent increase, the number of vacant units demanded to units. Adjust the previous graph to show the effect of the increase in earnings. The increase in earnings results in a new equilibrium rent of S per month and a new equilibrium number of vacancies of units. Now suppose that the state of California introduces rent control by setting the maximum rent at $2,400 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. As a result of rent control, there is a vacant units in the market.
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