Suppose the demand and supply schedules for rental apartment in the city of Goth

Question

Suppose the demand and supply schedules for rental apartment in the city of Gotham are given below Monthly Rent $2500 $2000 $1500 $1000 $500 Apartment Demanded 10,000 12,500 15,000 17,500 20,000 Apartment Supplied 15,000 12,500 10,000 7,500 5,000 Suppose the government decides to decrease the market equilibrium monthly rent by increasing the supply of housing. Assuming the demand remains unchanged by how many units of housing would the government have to increase the supply to get the market equilibrium rental price to fall to $1500, $100, and $500 per month ?

Explanation / Answer

Here the government will supply apartments to lower the equilibrium price For doing this the government must supply the number of aparments falling short to fulfill the demand... i.e. At a particular rate Government must supply apartments = Apartments demanded - Apartments supplied At $1500: Apartments Demanded = 15,000 Apartments Supplied = 10,000 government must supply = 15,000 - 10,000 = 5,000 i.e. government must supply 5,000 apartments to lower price to $1500 Similarly, At $1000 Government must supply 10,000 apartments(i.e. 17,500 - 7,500)to lower price to $1000 and At $500 Government must supply 15,000 apartments(i.e. 20,000 - 5,000) lowering price to $500

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