Question

Suppose that the government wishes to decrease the market equilibrium monthly rent by increasing the supply the housing. Assuming that demand remains unchanged, by how many units of housing would the government have to increase the supply of housing in order to get the market equilibrium rental price to fall to $1500 per month? To $1000 per month? To $500 per month?
(a) 12,500 apartments at a rent of $2000 per month
(b) A shortage of 5,000 apartments per month, 10,000 apartments will actually be rented each month
(c) A surplus of 5,000 apartments per month, 10,000 apartments will actually be rented each month
(d) 2,500 more apartments, 5000 more apartments; 7,500 more apartments.

Answer 1

Answer:

• ,000 new apartments will make the equilibrium price = $1,500
• 10,000 new apartments will make the equilibrium price = $1,000
• 15,000 new apartments will make the equilibrium price = $500

Explanation:

Rent                                Demand                           Supply

2,500.00                        10000                               15000

2,000.00                         12500                               12500

1,500.00                         15000                               10000

1,000.00                         17500                                 7500

500.00                           20000                               5000

The equilibrium quantity is 12,500 apartments with a $2,000 rent per month. If the government wants to lower the equilibrium rent price by increasing the supply of apartments, then it must build:

• 5,000 new apartments will make the equilibrium price = $1,500
• 10,000 new apartments will make the equilibrium price = $1,000
• 15,000 new apartments will make the equilibrium price = $500