(1) Which rental apartment market curve shifts? ______ Which direction? _______
(2) Explanation of your reasoning. _________________________________________
______________________________________________________________.
(3) On your own piece of paper, graph the effect of this change on the market for Rental Apartments (no need to draw this electronically).
As a result of this change, the equilibrium price will (increase/decrease) _____, and the new equilibrium quantity will (increase/decrease)_____.
Event 3: The economy goes into a deep recession, with lower incomes for most people. (NOTE: Assume rental apartments are an “inferior good.”)
(1) Which rental apartment market curve shifts? ______ Which direction? _______
(2) Explanation of your reasoning. _________________________________________
______________________________________________________________.
(3) On your own piece of paper, graph the effect of this change on the market for Rental Apartments (no need to draw this electronically).
(4) As a result of this change, the equilibrium price will (increase/decrease) _____, and the new equilibrium quantity will (increase/decrease)_____.
) Event 4: The cost of running and maintaining rental apartments increases due to increased regulations and higher property taxes.
(1) Which rental apartment market curve shifts? ______ Which direction? _______
(2) Explanation of your reasoning. _________________________________________
______________________________________________________________.
(3) On your own piece of paper, graph the effect of this change on the market for Rental Apartments (no need to draw this electronically).
) As a result of this change, the equilibrium price will (increase/decrease) _____, and the new equilibrium quantity will (increase/decrease)_____.
1. Tony’s “Rugs-R-Us” Toupee shop sells hairpieces for balding men. Tony knows that a 15% increase in the price of his hairpieces will result in a 5% decrease in the number of hairpieces sold. The price elasticity of demand (pEd) facing Tony’s business equals ____, indicating an ___________.
a.
0.05; inelastic demand
b.
0.15; elastic demand
c.
0.33; inelastic demand
d.
3.0; elastic demand
2. A recent study at a liberal arts college concluded that the price elasticity of demand (pEd) is 0.80 for college courses at their institution. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to:
a.
decrease tuition in order to increase revenue by boosting enrollment.
b.
increase tuition in order to increase revenue.
c.
leave tuition unchanged as a change in tuition is unlikely to enhance the school’s budget by increasing revenue.
d.
decrease tuition because demand for courses is elastic.
