Figure 4-5 Figure 4-5 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R 0 .
-Refer to Figure 4-5.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Question

Figure 4-5  Figure 4-5 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R 0 .
-Refer to Figure 4-5.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve but below the price level. When a rent ceiling is imposed below the equilibrium price, it reduces the price producers receive, thus reducing their surplus. The area that represents the portion of producer surplus transferred to consumers is the area directly above the new price level but below the original equilibrium price, which is area D.

Figure 4-5 Figure 4-5 Shows the Market for Apartments