Q1. Firewood prices in places from northern California to Boston and suburban New jersey have remained steady even though the supply of firewood has been diminished by environmental restrictions on cutting, The Wall street Journal reports that sales of gas fireplaces are outpacing sales of wood-burning hearths and that "people are burning less and less wood." Use supply and demand analysis to show why firewood prices are not rising while the quantity of firewood burned is declining. (Hint: Allow for simultaneous shifts in the demand and supply of firewood.)
Q2. The famous Swedish economist Assar Lindbeck remarked in his book on rent controls, "Rent control appears to be the most efficient technique presently known to destroy a city-except for bombing." Rent controls place price ceilings on rents at levels below equilibrium rental rates for the stated purpose of making housing more affordable for low-income families. Using demand and supply analysis, answer the following questions:
a. How does imposing rent controls affect the number of housing units available to low-income families?
b. Under rent controls, can all low-income families get rent-controlled housing?
c. Who gains from rent controls? Who loses?
d. Why would Professor Lindbeck think rent controls are destructive?
e. Can you think of an alternative policy to make plenty of housing available to low-income families that would not be subject to the problems of rent controls?