The graph below represents the housing market in a small city. The city is considering establishing a rent control in this market, such that the rent for an apartment may not exceed $500 per month. Present a standard welfare analysis table of the loss to society from moving from a housing rental market with no rent control, to one with a rent ceiling of $500. In your table, be sure to indicate consumer and producer surplus before and after the rent-control policy goes into effect; then determine the change in each, as well as the overall deadweight loss. 1250 A 1000 (dollars per manth)

The graph below represents the housing market in a small city. The city is considering establishing a rent control in this market, such that the rent for an apartment may not exceed $500 per month. Present a standard welfare analysis table of the loss to society from moving from a housing rental market with no rent control, to one with a rent ceiling of $500. In your table, be sure to indicate consumer and producer surplus before and after the rent-control policy goes into effect; then determine the change in each, as well as the overall deadweight loss. 1250 A 1000 (dollars per manth)

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter7: Market Efficiency And Welfare

Section: Chapter Questions

Problem 5P

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Suppose the rent control (price ceiling) in California will be nullified for a year and that market rents will now be institutionalized. Assume that all apartment units are of identical structure and so are offered at the same rent. To address the plight of the residents, especially those who may be unable to pay the market rent, an income subsidy will be given to all low-income households equal to the difference between the old controlled rent and the new market rent. In a diagram, show the effect on the market for apartments the elimination of rent control. What will happen to the quality and quantity of rental housing supplied by the apartment owners?