Answer to Question #145222 in Microeconomics for Shivanshu Mahato

Question

You have been given the following information about the housing market for two-bedroom rental units in Vancouver:


c. Suppose that a price ceiling of $1,200 rent per month is imposed in the Vancouver housing market, what will be the effect of this on housing market in Vancouver?
Answer:

d. Suppose that a price floor of $1,100 rent per month is imposed in the Vancouver housing market, what will be the effect of this on housing market in Vancouver?
Answer:

e. Suppose that the government imposed a tax of $1000on homeowners, who will pay this tax? show and explain in graph (in part a, above)
Answer:

f. Suppose that the government imposed a tax of $1000 on homeowners, show and explain the effect on consumer surplus, producer surplus, Dead Weight Loss, government revenue and market efficiency.

Answer 1

c. If a price ceiling of $1,200 rent per month is imposed in the Vancouver housing market, then the shortage of houses will occur.

d. If a price floor of $1,100 rent per month is imposed in the Vancouver housing market, then the surplus of houses will occur.

e. If the government imposed a tax of $1000 on homeowners, then both homeowners and buyers will pay this tax.

f. If the government imposed a tax of $1000 on homeowners, then both consumer and producer surplus will decrease, the Dead Weight Loss will occur, government revenue will be 1000×Q and market will become inefficient.