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Suppose we are analyzing the housing market in a city. Renters buy housing from landlords. Their respective demand and supply curves are shown in the
Suppose we are analyzing the housing market in a city. Renters buy housing from landlords. Their respective demand and supply curves are shown in the chart below. Suppose the city has enacted restrictive zoning policies that arti- cially depresses the supply of housing at Q X - below the equilibrium quantity that would prevail under perfect competition (Qy). Suppose the city is con- sidering two policies. Policy A imposes \"rent control\" or a price ceiling, so landlords cannot charge more than Pz. Policy B removes all restrictive zon- ing policies and restores the housing market to perfect competition. Call the baseline restrictive zoning policies Policy 0. Use the letters A-H to answer the questions below. PRICE SUF'F'L'I'r cu: OJ QUANTITY 1. 'What is the total spending on housing for renters under Policy 0? For Policy A? For Policy B? 2. What is the total surplus for renters under Policy 0? For Policy A? For Policy B? 3. Calculate the change in spending for renters from Policy 0 to Policy A, and from Policy 0 to Policy B. 4. Calculate the change in renter's surplus from Policy 0 to Policy A, and from Policy 0 to Policy B. 5. Compare your answers from parts (3) and (4)
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