Assume income is currently $1000 a month (Y=1000, in the equation above.)
The mayor, concerned about housing affordability, announces a rent control policy that sets a max price for a 1 bedroom apartment at $800. How does this policy influence the market price and quantity? Will all renters be better off due to this policy?
Include a diagram of your results in your answer.
(You do not need to calculate any areas related to efficiency, just show any change in deadweight loss.)
The city council is concerned by the lack of availability of apartments, and instead of the rent control policy, suggests providing a $ 300 subsidy for people to rent apartments. Think of a subsidy as a negative tax where buyers pay rent, then receive a $ 300 cheque every month from the City of Kingston.
Would this policy ease the concerns of the city council? Would renters be paying more or less or the same as under the rent control policy? Would landlords get more or less? Carefully Explain.