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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 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. The Market for Rental Properties in the Inland Empire 3000 2700 Supply Demand 2400 2100 1800 Supply 1500 1200 New Rent 900 Demand 600 Vacancies Demanded with Price Control 300 100 200 300 400 500 00 700 800 900 1000 Vacancies Supplied with Price Control QUANTITY (Number of vacant units) 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 jobs. RENTAL PRICE (Dollars per month)

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. The Market for Rental Properties in the Inland Empire 3000 2700 Supply Demand 2400 2100 1800 Supply 1500 1200 New Rent 900 Demand 600 Vacancies Demanded with Price Control 300 100 200 300 400 500 00 700 800 900 1000 Vacancies Supplied with Price Control QUANTITY (Number of vacant units) 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 jobs. RENTAL PRICE (Dollars per month)

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter4: Labor And Financial Markets
Section: Chapter Questions
Problem 31P: Table 4.6 shows the amount of savings and barrowing in a market for loans lo purchase homes,...
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2. Analyzing occupancy rates 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. The Market for Rental Properties in the Inland Empire 3000 O- 2700 Supply Demand 2400 2100 1800 Supply 1500 1200 New Rent 900 Demand R 600 Vacancies Demanded with Price Control 300 100 200 300 400 500 00 700 800 900 1000 Vacancies Supplied with Price Control QUANTITY (Number of vacant units) 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 jobs. The increase in jobs 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 $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. As a result of rent control, there is a of vacant units in the market. RENTAL PRICE (Dollars per month)
Transcribed Image Text:2. Analyzing occupancy rates 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. The Market for Rental Properties in the Inland Empire 3000 O- 2700 Supply Demand 2400 2100 1800 Supply 1500 1200 New Rent 900 Demand R 600 Vacancies Demanded with Price Control 300 100 200 300 400 500 00 700 800 900 1000 Vacancies Supplied with Price Control QUANTITY (Number of vacant units) 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 jobs. The increase in jobs 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 $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. As a result of rent control, there is a of vacant units in the market. RENTAL PRICE (Dollars per month)
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