7. Subsidies for Middle-Income Households Consider the effects of housing subsidies on the fi ltering process. As before, assume that each household tolerates up to a 10-unit mismatch between its ideal and the actual quality of housing. All new housing is built for high-income households. Upgrading housing to a higher quality level is prohibitively expensive. Use Figure 145 as a starting point, with points l , m , and h . Suppose a subsidy program pays 20 percent of the housing expenses of middle-income households. The price elasticity of demand for housing is 1.0. a. For middle-income households, the ideal quality of housing services increases from _____ to _____ . A middle-income household will reach a 10-unit mismatch after _____ years. At that time, a high-income household has a mismatch of _____ . b. To induce the high-income household to move, the price of 24-unit housing [increases, decreases]. c. To induce a low-income household to buy the 14-unit dwellings vacated by middle-income households, the price of 14-unit dwellings [increases, decreases]. d. Draw a graph like Figure 146 to show the long-run effects of the subsidy program on the housing stepladder.