(a)Suppose price ceiling = $1,200 is imposed.

(i)Find the quantity demanded. The quantity demanded would be 650.

(ii)Calculate the shortage.0

(b) Suppose price ceiling = $900 is imposed

(i)Calculate the shortage

(ii)Find the black-market rent.

(c)After a binding rent control is imposed, the shortage of rent-controlled apartments is more serious in long run. Explain. (Do not just say that demand and supply are more elastic in long run.)

(d) A binding rent control is imposed, which leads to a shortage. Draw a graph to show the effects of the binding price ceiling. Indicate the shortage on the graph. Suppose the supply of rent-controlled apartments increases. (Price elasticity of supply remains unchanged). Because of the increase in supply, the existing price ceiling becomes non-binding. On the same graph, illustrate how the increase in supply affects the market. Indicate the new shortage if any.