New York Apartments

4. New York Apartments. The market supply and demand functions for apartment rentals in New York are given as follows: P=2500-Q and P=300+Q where P is the monthly rent in $ and Q is the number of apartments rented per month.

1. 1. Which is demand, which is supply? Explain.
2. 2. What is the equilibrium market price and quantity?
3. 3. Measure of the benefits consumers and producers receive given the equilibrium and show graphically.

The government is considering placing a price ceiling on monthly rent which limits the amount that landlords can charge in order to attract more people to the city. If they do proceed with this, the price would be set at $1000.

1. 4. What is the outcome of this price ceiling (excess demand/shortage or excess supply/surplus and in what amount)? Show your results graphically.
2. 5. Do consumers benefit from the price ceiling? Do producers? What is the loss in overall economic efficiency?

Assume that because of the price ceiling, quantity supplied falls and quantity demanded rises, resulting in long lines and waiting lists.

1. 6. Knowing this who is more likely to stand in line: lawyers or underemployed retail workers? Why? (Use economic terms.)
2. 7. Markets abhor a disequilibrium. Over time, the market will fully adjust to the price ceiling. What will happen to market demand?
3. 8. What is the new equilibrium price and quantity?
4. 1. What is the total economic cost of obtaining an apartment with a price ceiling? Graph it and provide numerical value.