Consider the housing market described by these equations:
(P = price)
Qd = 10 – P (Qd = quantity demanded)
Qs = 2 + P (Qs = quantity supplied)
a. Graph the supply and demand curves for housing.
b. Find the equilibrium price and quantity.
c. Calculate the consumer and producer surplus.
d. Now suppose that a rent control price of $3 is imposed on the market. Find the new equilibrium price and quantity, and the new consumer and producer surplus.
e. Using your answers in b and c, how have consumers and producers been affected?
f. Show the deadweight loss.