1. (8 points)Market Determinants of Value - Supply and Demand

San Francisco (SFO) has one of the highest average rent in the U.S. There are many forces that influence market value (rent) in large cities, including growth in job opportunities, higher salaries, access to public amenities, proximity to commercial spaces, etc. The rental market is an example of the users market (from chapter 1), where the "buyers" (tenants or renters) receive rights to use space and the "sellers" (property owners, landlords, etc.) provide the rights to use the space.

Use the information provided to answer the following questions about the user (or rental) market for residential property in San Francisco. (Note: This is a hypothetical scenario.) Residents are often willing to pay higher rent to live in downtown SFO because they value the benefits from having access to various attractions like stores, bars, restaurants, and theaters. However, the mandated shut-down from the COVID-19 pandemic limited social gatherings and access to these attractions. Suppose that residents feel they no longer benefit from living in downtown SFO and move away from downtown and in some cases, the city altogether. At the same time, there is a temporary halt on residential evictions and so landlords are unable to evict renters for the duration of the pandemic (as would happen under normal market conditions).

1. (5 points) How will this affect the demand and/or supply of rental properties in downtown SFO?

1. (3 points) How do you expect the equilibrium rental rate and equilibrium quantity of rental properties in downtown SFO to respond?