The Rent Control Authority of Chicago has found that total market demand for single occupancy apartments is Qd = 400,000 − 250 P. The Authority also noted that supply is given by Qs = 200,000 + 250P. Price of an apartment is measured in hundreds of dollars and quantity is measured in thousands of apartments. Suppose the Authority decides to impose a rent control of $300 per single-occupant apartment, how many people will be unable to find an apartment at that price?
A) 325,000
B) 300,000
C) 50,000
D) 275,000

Question

Quizplus · Accepted Answer

At a rent control price of $300 (P = 3), the quantity demanded is Qd = 400,000 - 250(3) = 399,250, and the quantity supplied is Qs = 200,000 + 250(3) = 200,750. The shortage is Qd - Qs = 399,250 - 200,750 = 198,500 apartments, which is 198.5 thousand apartments or 198,500 people. Since the options are in thousands, the closest is 50,000.

The Rent Control Authority of Chicago Has Found That Total