Consider a simple market with just five potential renters and four apartments. T
ID: 1184033 • Letter: C
Question
Consider a simple market with just five potential renters and four apartments. This table shows the maximum amount that each renter would be willing to pay for an apartment. Anne $800 Bill $700 Charlie $600 David $500 Ellen $400 The following graph shows the supply and demand curves in this market. The supply curve is represented as a vertical line at 4. (To keep the problem simple, we will assume that it is impossible to build new apartments, so the supply remains fixed at four.) On the demand curve, each point is labeled with the name of the corresponding renter. This demand curve shows that, for example, at a price of $700, only two renters, Anne and Bill, would demand an apartment. 4.4. Again, assume David and Ellen live in rent-controlled apartments. By how much will rent on non-rent-controlled apartments decrease if price controls are removed? How would i calculate this? _____ (please enter whole number)Explanation / Answer
The demand curve would only change in that David and ellen would be left off. Since there were 4 total apartments, 2 of which were subject to rent control, there are only two non-rent controled apartments, and this is represented by the new supply curve (the vertical line at 2). The equilibrium is at a price of $700.