Land-Use Regulations. Suppose the market for rental units in Eugene is given by: Demand : Rd = 20 Hd Supply : Rs = (1 + k) Hs where R is rental price, and k is the level of land-use restrictions in Eugene. For now, we will not assign a value to k. (A) Solve for the equilibrium price and quantity in terms of k. What happens to equilibrium price and equilibrium quantity as you increase the land use regulations (increase k) ?

B) Graphically illustrate your answer to part A. That is, draw the initial equilibrium, and illustrate what happens to the equilibrium when k increases. (1 point)

B)Now suppose k = 2. Compute the equilibrium using the equations derived in part A.

D) The Eugene public is upset over high rental prices so they demand Politicians fix the problem. They deem that the maximum price anybody should pay for rent is one less than the equilibrium price you computed in part B. The local government implements a rent control of of the price in B minus 1. Quantify the shortage of housing arising from the rent control when k = 2 using the supply and demand equations.

(E) An alternative to rent control would be to lower land-use restrictions. Find the level of land use restrictions k such that equilibrium rents are the equilibrium price in part B - 1.Show your work

(f) In the housing market, which policy is more efficient? (Think back to the 201 definition of efficiency). Does the solution proposed in part E involve any costs? What are some consequences to lowering Land Use Regulations? No math is needed