Question
In Saint Louis, Missouri, the demand for new houses is given by 320 - 2x while the supply for new houses by 20 + 3x,
In Saint Louis, Missouri, the demand for new houses is given by 320 - 2x while the supply for new houses by 20 + 3x, where x is the number of new houses per year. The mayor is concerned about the expansion of the city and established a limit of 50 new houses per year.
Cosidering that the prices are in thousand of dollars, please answer the following questions:
a) What are the consequences in terms of price, licence permit value, city's revenue and whether there is any Dead Weight Loss?
b) His economic advisor suggested to have development tax of $50,000 for each new house paid by the builder. How can you compare it with the limit established of 50 new houses per year? How much will landowners be affected?
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