The elected officials in a west coast university town are concerned about the "exploitative"rents

being charged to college students. The town council is contemplating the imposition of a$350

per month rent ceiling on apartments in the city. An economist at the university estimatesthe

demand and supply curves as:

Q_D= 5600 - 8PQ_S= 500 + 4P,

where P = monthly rent, and Q = number of apartments available for rent.For purposes ofthis

analysis, apartments can be treated as identical.

a.Calculate the equilibrium price and quantity that would prevail without the price ceiling.(2

points)

b.Calculate producer surplus and consumer surplus (calculate both individually)atthis

equilibrium. (2 points) Then sketch a diagram showing both. (1.5 point)

c.What quantity will eventually be available ifthe rent ceiling is imposed? (1 point)

d.Calculate any changes in consumer surplus and producer surplus from the priceceiling

(calculate any changes in both individually). (2 points)

e.Does the proposed rent ceiling result in a gain in total surplus? (1 point)