The graph shows the demand for on-campus student housing at UCLA in Los Angeles.
ID: 1257189 • Letter: T
Question
The graph shows the demand for on-campus student housing at UCLA in Los Angeles. The college has 5,000 rooms for rent. The equilibrium rent is s a week and rooms are rented. If the college sets a rent ceiling on on-campus housing of $100 a week, the quantity of rooms rented is With the rent ceiling, this market is The allocation ofhousing with the rent ceiling is OA fair because without the rent ceiling, the university would charge too high a rent OB, fair because it makes housing affordable for the poorest students OC. unfair because it makes it difficult for off-campus landlords to compete with on-campus housing OD. unfair because it prevents voluntary exchange and does not necessarily reallocate housing to the poorest students Rent (dollars per woek) Quantity (rooms)Explanation / Answer
The equillibrium rent is $125 a week and 5000 rooms are rented.
The equillibrium point is where demand of room exactly matches the supply and both the curves intersect each other. Thus the equillibrium rent is $125 a week and 5000 rooms arerented.
If the college sets a rent-ceiling on on-campus housing of $100 a week , the quantity of rooms rented is 5000.
As the supply of rooms is constant at 5000 rooms,irrespective of the price, so if the college sets a rent-cieling on on-campus housing of $100 a week, the equillibrium point where demand curve intersects the supply curve, remains the same, i.e, at 5000 rooms, so the quantity of rooms rented is 5000.
With the rent ceiling, this market is Perfectly competitive market. The demand in the market is perfectly inelastic as even with change in the rent, the quantity of rooms rented remains the same.
The allocation of housing with the rent ceiling is :
Ans. D unfair because it prevents voluntary exchange and does not necessarily reallocate housing to the poorest students.
This is Because the supply of rooms is fixed, the change in rent would only bring the change in the money supply and it is not necessary or there is no such assumption that low rent would lead to allocation of rooms to poor students
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