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Issue using the four quadrant model

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In Vancouver it has been a concern that landlords do not rent out their housing units. We analyze this issue using the four quadrant model. Begin with marking the usual equilibrium on the four quadrant diagram. Now suppose that only 50 percent of housing stock are supplied in the housing service market. To keep things simple, assume that having vacant housing doesn't affect the cap rate.

a) Without solving anything numerical, mark the new equilibrium on the diagram and describe qualitatively how the new equilibrium differs from the initial one in terms of the endogenous variables: rent, price, construction, housing stock, and housing supply. (Note that in new equilibrium housing supply differs from housing stock while they are same in the initial equilibrium. Clearly label all curves and axes.)

b) Suppose housing service demand is

Reference no: EM132473342

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