This is Question B to be used for D

Part B (i):

Qantity supplied when Price is 350:

Q = -200 + P

Q = -200 + 350 = 150

Qantity demanded when Price is 350:

Q = 1000 - 2P

Q = 1000 - (2*350) = 300

At price of $350, supply is 150 units and demand is for 300 units, therefore there isexcess demandin the market.

Part B (ii):

Consumer surplus under new law = Area of triangle A = (500-425^a)*150/2 = $5625

Producer surplus under new law = Area of triangle B = (350-200)*150/2 = $11250

Note a: Put Q=150 in demand curve and you get the price = 425

(D) Now suppose Gotham imposes a $350 price ceiling on the rent for student apartments. (i) What is quantity supplied and quantity demanded? Is there excess supply or excess demand? (ii) Calculate consumer and producer surplus under the new law. How have these changed from (B)?(E) Let's think about how the new law affects the market for luxury apartments. (i) How is the rent control law likely to affect demand for luxury apartments? Why? (Assume that luxury apartments are exempt from rent control, which is more or less true in most cities.) (ii) How is rent control likely to affect the supply of luxury apartments, especially in the long-run? Why? (E) Suppose that Gotham reduces the cost of building permits, resulting in a shift of the supply curve to S(P) = -50+ P. (i) What is the equilibrium price and quantity for student apartments, if there is no price ceiling? (ii) Is a price ceiling of $350 binding? (ii) Calculate consumer surplus, and compare with (D). Does your answer suggest an alternative to rent control laws