Figure 4-5

Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-5.What is the value of the deadweight loss after the imposition of the ceiling?

Question

Figure 4-5
  
Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-5.What is the value of the deadweight loss after the imposition of the ceiling?

Quizplus · Accepted Answer

The deadweight loss is the triangle formed by the difference between the quantity demanded and quantity supplied at the price ceiling and the quantity demanded and quantity supplied at the equilibrium price. In this case, the equilibrium price is $1,500 and the quantity exchanged is 15,000 apartments. With the price ceiling of $1,000, the quantity exchanged drops to 10,000 apartments. Therefore, the deadweight loss is 0.5 * ($1,500 - $1,000) * (15,000 - 10,000) = $100,000.

Figure 4-5 Figure 4-5 Shows the Market for Apartments in Springfield. Recently