Microeconomic please type your answer. Question 1 (10 marks). Suppose that the N
ID: 1123385 • Letter: M
Question
Microeconomic
please type your answer.
Question 1 (10 marks). Suppose that the New York City government imposes a price ceiling on apartment rent. The demand and supply diagram is as given P2 Supply Pc Price ceiling P1 Demand (a) Using the given diagram and the given letters identifying specific areas as shown (i.e, A, B, C, etc), copy the following table and fill in the letters in each cell to measure each values. (9 marks) Without price ceiling With price ceiling Change Consumer Surplus Producer Surplus Total Welfare (b) Based on the given diagram, which area(s) represents the deadweight loss from this price ceiling? (1 mark)Explanation / Answer
Ceiling price = Pc (Since price ceiling is imposed below free market price)
(a) Note that
Consumer surplus (CS) = Area between demand curve and market price
Producer surplus (PS) = Area between supply curve and mrket price
Total welfare = CS + PS
(b)
Deadweight loss = Area (C + D)
Without price ceiling With price ceiling Change Consumer surplus A + C A + B B - C Producer surplus B + D + E E - B - D Total welfare A + C + B + D + E A + B + E - C - D