What is the marginal willingness to pay

Reference no: EM13197032

Assume that the market equilibrium rent for two-bedroom apartments in Santa Monica, California is $1500 per month and the quantity is 40,000 units. The city council of Santa Monica establishes a rent control of $1200 per month on two-bedroom apartments.
(a) Assume that the elasticity of supply of two-bedroom apartments in Santa Monica is 1.5. What will be the new quantity supplied after the rent control?
(b) Assume that the elasticity of demand for two-bedroom apartments is 1. What is the quantity demanded at the rent controlled price and what is the shortage?
(c) Find the change in consumer surplus at the rent controlled price and new quantity supplied compared to the market equilibrium.
(d) With the new quantity supplied, what is the marginal willingness to pay for these apartments?

Reference no: EM13197032

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