According to Statistics Canada, 522,140 units were rented in the agglomeration of Montreal in 2016. In the same year, 4% of dwellings were

unoccupied. According to the Union des Banques Suisses, the average rent price for a 3 1/2 in Montreal in 2015 was CAD 879. We will assume that between 2015 and 2016, this price increases by 2%, therefore increases to approximately

CAD 900.

To facilitate access to housing, Ms. Gagnon, economist for

services of the City of Montreal, proposed to cap the price of

rents at CAD 850 as of January 1, 2017.

1. Represent the equilibrium of the rental housing market in Montreal

in 2016 using a supply and demand graph.

2. On the same graph, represent consumer surpluses and producers. You can use letters to denote

areas corresponding to these surpluses.

3. On the same graph, represent the equilibrium of the housing market

rentals in Montreal in 2017, after the cap policy

proposed by Madame Gagnon.

4. Represent consumer and producer surpluses for

2017.

5. How does the quantity of rented dwellings at equilibrium change?

Why ?

6. Based on your answers to the previous two questions, what do you think of the

public policy proposed by Madame Gagnon?