1.Rent control is typically imposed ostensibly for the purpose of helping the po
ID: 1101731 • Letter: 1
Question
1.Rent control is typically imposed ostensibly for the purpose of helping the poor. Why might you be able to argue that few poor people will actually be the beneficiaries of such controls?
2.Explain the difference between a change in demand and a change in quantity demanded.
3.The following are some changes that may take place in the market for textbooks. For each of the following, indicate what will happen to either the demand for or the supply of textbooks by listing which curve is affected and then the terms: "shift right or "shift left".
(a.) An increase in student enrollment at universities across the country.
(b.) A decrease in the price of ink used to print textbooks.
(c.) A drop in income (textbooks are a normal good).
(d.) An improvement in the technology used to print textbooks.
(e.) An increase in college tuition.
4.Suppose you want to buy a popular brand of digital camera. Every store in town is out of stock. You are willing and able to pay the current market price of $300 for a camera, but you cannot find any available. Is the market for the digital camera in equilibrium? If not, is the market equilibrium price of the camera above or below $300? Use supply and demand analysis to explain your answer.
Explanation / Answer
1.) When a rent controlis applied,the government fixes a price ceiling. Hence the owners of the house cannot charge more than pre defined amount of rent as decided by the Government.
This price ceiling is usually lower than the current market price, so as to lower the prices. This way government hopes that poor people will be able to afford cheaper housing.
At the free market equilibrium the price was say P and the quantity demanded and supplied was Q.
Now at this lower price the the demand of houses will increase as now more people can afford the houses. At the same time the supply of houses for rent will decrease as some sellers will find the lower price not attractive enough.
This will make the demand much higher than the supply of the houses for rent.
This excess demand over supply will lead to things like black market, favouritism etc. People now will rent their houses to those people who are either their friends or are willing to offer higher rent illegally.
Also the govt. will lose on housing tax revenue as officially the price and quantity of houses rented will be lower.
2.) A change in quantity demanded is a change along the demand curve due to change in price. It reflects how the quantity demanded when the price changes ceterius paribus. For example change is quantity demanded is the change in quantity of icecreams demanded due to increase in price of icecreams
A change in demand is characterized by shifting in the demand curve. The change in demand due to factors other than the price. These factors may be environmental factors,change in income, change in prefrences, change in price of subsitute and compliment products. For example change in the demand of ice creams due to hotter climate, or increase in people income, or people reducing consumpton of high sugar foods like icecream, or change in price of cola's(which is a subsitute), change in price of chocolate syrup (which is a complement)
3.)
a) Demand curve will shift right
b) Supply curve will shift right
c) Demand curve will shift left
d) Supply curve will shift right
e) Demand curve will shift left.
4.) No the market for digital camera not in equilibrium. As we can see that at the current market price of $300the demand of cameras is more than the supply of cameras. At this price more buyers are willing to buy the camera than the supply of the camera.
The equilibrium price is higher than $300. At a higher price the demand will be reduced to some extent, as some buyers will not willing to buy at a higher price. At the same time the supply will increase as higher price will lure higher production. This will help close the demand supply gap which wis present at the current price of $300.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.