What is the equilibrium price before the subsidy

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Suppose a town decides to give a $100 subsidy to each renter to help with rent payments. Thus if initially the rent had been $1,000, with the $100 subsidy the out-ofpocket cost to the renter of a one-bedroom apartment is only $900. Using the data from Problem 9, answer each of the following questions.

(a) Using the data from Problem 9, draw the demand curve before the subsidy. How does this subsidy affect the demand for one-bedroom apartments? Draw the new demand curve after the subsidy is introduced.

(b) If the supply of apartments is fixed at 1,200 units, what is the equilibrium price before the subsidy? What is the equilibrium price after the subsidy?

(d) Have renters benefited from the town's rent subsidy? Have apartment owners (suppliers)?

Reference no: EM131142474

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