Question

Consider the following data from the market demand and supply for apartments.

Rent Quantity Demanded Quantity Supplied
$2,000 5,000 23,000
$1,800 8,000 20,000 $1,600 11,000 17,000
$14,000 $1,400 14,000
$1,200 17,000 11,000
$1,000 20,000 8,000
A. Suppose that the average monthly rent for apartments is $1,200. At this price, how many apartments will be rented in this market?
B. Is the market currently in equilibrium, experiencing a shortage, or experiencing a surplus?
C. What do you expect to happen to the average rent?
D. What is the equilibrium rent and quantity in the market?

Answer 1

11,000

Shortage

rise

$14,000 14,000

Step-by-step explanation:

At the price of $1200, only 11,000 apartments would be rented. This is the quantity supplied.

Because the quantity demanded (17,000) exceeds the quantity demanded (11,000), there is a shortage. Shortage exists when quantity supplied exceeds quantity demanded. Generally, when price is below equilibrium, there is a shortage.

Due to demand exceeding supply, prices would rise until equilibrium is restored.

Equilibrium price is the price at which quantity demanded equals quantity supplied. Equilibrium quantity is the quantity where quantity demanded equals quantity supplied