Suppose that the demand for office space (measured in millions of square feet) is Q 150

Suppose that the demand for office space (measured in millions of square feet) is Q ¼ 150 3R:

The demand for vacant space is V ¼ 25 R The total amount of space is 110 msf. The cost of capital is 12.5 dollars per square foot per year.

a. Solve for rent, quantity of occupied space, quantity of vacant space, and the vacancy rate in the short run.

b. Given these answers, is there an incentive to build more space?

c. What are the long-run equilibrium rent, total stock of space, and vacancy rate in this market?