Question

Suppose that a landlord is interested in renting out a two-bedroom apartment for $1000 a month for the next year. The landlord requires rent to be paid

Answer 1

The apartment supply increases by 30% and the price sensitivity is 3.9.

Step-by-step explanation:

The percentage increase in apartment supply can be calculated using the formula:

Percentage increase = ((New quantity supplied - Initial quantity supplied) / Initial quantity supplied) * 100

Using the given information, the initial quantity supplied is 10,000 units and the new quantity supplied is 13,000 units. Plugging these values into the formula:

Percentage increase = ((13,000 - 10,000) / 10,000) * 100 = 30%

The price elasticity of supply measures the sensitivity of the quantity supplied to changes in price. It is calculated as the percentage change in quantity supplied divided by the percentage change in price.

Using the formula:

Price elasticity of supply = ((Percentage increase in quantity supplied) / (Percentage increase in price))

In this case, the price increases from $650 to $700, which is a 7.7% increase. Plugging the values into the formula:

Price elasticity of supply = (30% / 7.7%) = 3.9