Materials from Class > Mon 10/16

Daily exercise on rent control

A rental market has the demand, supply, WTP, and WTA curves shown below. It is initially in equilibrium but the government is considering imposing a rent control at $200.

Demand and WTP: `Q^D = 1200 - 2P^D` `WTP = 600 - 0.5Q^D`
Supply and WTA: `Q^S=2P^S` `WTA = 0.5 Q^S`
  1. What is the initial equilibrium P and Q before the rent control?
  2. What is the new Q under the policy?
  3. What is the gain in CS to stayers (those who keep their apartments)?
  4. What is the loss in CS to leavers (those who have to move)?

Please scan and submit your answer.

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Peter J Wilcoxen, The Maxwell School, Syracuse University
 Revised 10/17/2023