The annual demand for office space in London is () = 440 2, where quantity is measured in millions of square feet and prices are in per square foot. There are currently 300 (million) square feet of office space available. Suppose that owners are willing to rent office space for any positive price and no new offices can be built in the short run.

a. Draw the supply of office space in London. [6 points]

b. Calculate the equilibrium price and quantity. [7 points]

c. Suppose that, to encourage businesses to move back into the city after the Covid19 crisis, the government offers a subsidy of 10 per square foot of office rentals. How does this subsidy affect the equilibrium price and quantity? Justify. [7 points]

d. How would your answer to part (c) change in the long run? [5 points]