Question
PLZ SIMPLY FILL IN THE BLANKS USING INFORMATION PROVIDED THANKS Suppose that in the rental market for apartment units the monthly demand by low-income (poor)
PLZ SIMPLY FILL IN THE BLANKS USING INFORMATION PROVIDED THANKS
Suppose that in the rental market for apartment units the monthly demand by low-income (poor) consumers is given by P=1000-2Q, where Q is the number of units.The marginal private cost of maintaining the units by the landlords is a constant $500 per unit per month.Suppose that low-income consumers are eligible for subsidized rent.Landlords renting units to low-income consumers receive a subsidy from the government of $250 per unit per month to cover the difference between the normal market rent on the units and the subsidized rent paid by the eligible poor.Using a graph with dollars on the vertical axis and Q on the horizontal axis, answer the following questions:
42. What is the deadweight loss of the subsidy at the market equilibrium? $ __________
Now suppose the demand for housing by the poor generates external benefits to the non-poor in society.Suppose the marginal external benefit curve is given by MEB=250.
43. With the subsidy of $250 in the presence of the external benefit, the deadweight loss in the market will be $ _____________.
44. The subsidy will cost the government a total of $ ________________.
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