Consider the market for rental housing in Yourtown. The demand and supply schedules for rental housing are given in the table.

Price

($ per month)

a.In a Free market for rental housing, what is the equilibrium price and quantity?

b.Now suppose the government in Yourtown decides to impose a ceiling on the monthly rental price. What is the highest level at which such a ceiling could be set in order to have any effect on the marker? Explain your answer.

c.Suppose the maximum rental price is set equal to $500 per month. Describe the effect on quantity demanded, supplied, and exchanged in the rental-housing market.

d.Suppose a black market develops in the presence of the rent controls in part (c). What is the black market price that would exist if all of the quantity supplied were sold on the black market?

Price Quantity Demanded Quantity Supplied (S per month) (thousands of units) (thousands of units) 1100 40 80 1000 50 77 900 60 73 800 70 70 700 80 67 600 90 65 500 100 60