What is maximum amount of money a tenant would have to pay

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Reference no: EM13233917

The demand curve for apartments in a particular country is expressed in the formula:

R1 = 1500 - Q1

The supply curve for apartments in that country is expressed in the formula:

R1 = Q1

where Q1 represents the number of apartments and R1 represents the cost to rent an apartment

Now the gov decided to pass a law that the cost to rent should not exceed $375 per apartment.

In order to minimize the damage such a law will have on apartment owners, the government decided to allow landlords to force their tenants to pay "key money" for the right to pay such low rent.

Assuming the cost to rent an apartment is fixed at 5 percent of the value of the apartment, what is the maximum amount of money a tenant would have to pay in "key money" to his landlord?

Reference no: EM13233917

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