The table above shows the demand for and supply of rental housing in Crainsboro.
ID: 1142096 • Letter: T
Question
The table above shows the demand for and supply of rental housing in Crainsboro. The city government is considering imposing a rent ceiling of $700 a month. With the rent ceiling, the market price for a rental unit is now $ dollars per month and there is a shortage of units of housing. If the rent ceiling is strictly enforced, the amount that a consumer is willing to pay for the last unit of housing legally|available is $ dollars per month.
Rent(dollars per month) Quantity demanded
(units per month) Quantity supplied
(units per month) 500 1,200 0 600 1,000 100 700 800 200 800 600 300 900 400 400 1,000 200 500 1,100 0 600
Explanation / Answer
Equilibrium is where quantity demanded = quantity supplied
In the above table, this happens at rent =$900 where quantity demanded and supplied are both 400 units.
When the rent ceiling is $ 700, quantity demanded is 800 units and quantity supplied is 200 units. Market price for a rental unit is now ( $700 ) for a month and there is a shortage of 600units (=800-200).
If the rent ceiling is strictly enforced, then price is $700 and housing legally available is 200units.(quantity supplied at $700). The amount that a consumer is willing to pay for the last of these 200 units is $1000. (When quantity demanded is 200, rent is $1000).