True.In the short run it is difficult to change the supply of apartments in new apartment build lings,which can take a year or more. Sinc apartments are a durable good,in the long run a change in price will induce suppliers to create more apartments (if price increases)or delay construction (if price decreases). 8.Suppose the government regulates the prices of beef and chicken and sets blo theExplain hy shorage of thes good will develop e the sizes of the tages. will happen to the price ofpork?Explain briefly. If the price of a commodity is set bebw its market-clearing level,the quantity that firms are willing to supply is less than the quantity that consumers wish to purchase.The extent of the excess demand implied by thisrespo ill depend on the relative elasticities of demand and supply For instanc,if both supply and demand are,the shortage is than if both are inelastic Factors such as the willingnesso eat less meat and the ability of farmers to change the size of their herds and hence produce less will determine these elasticities and influence the size of excess demand.Customers whose demands are not met will attempt to purchase substitutes,thus inc ing the demand for substitutes raising their prices If the prices of bef and market-clearing levels,the price of pork will rise,assuming that pork is a substitute for beefand chicken. 9.The city council of a small college town decides to regulate rents in order to reduce student living expenses.Suppose the average annual market-clearing rent for a two-bedro ent h had been $700 per nth and expected to increase to $900 within ayear.The city counci mits rents to their current $700 per month level. a。 Draw a supply and demand graph to illustrate what will happen to the rental price of an apartment after the imposition of rent controls. The rental price will stay at the old eguilibrium level of S700 per month The e rease to$900p er mo nth ma ay used by an increase in demand Given th istrue,the price fwill be below the new equilibrium and there will be a shortage of apartments b.Do you think this policy will benefit all students?Why or why not. It will benefit those students who get an apartment,though these students may also find that the costs of searching for an apartment are higher given the shortage of apartments.Those students who do not get an apartment may face higher costs as a result of having to live outside of the college True. In the short run it is difficult to change the supply of apartments in response to a change in price. Increasing the supply requires constructing new apartment buildings, which can take a year or more. Since apartments are a durable good, in the long run a change in price will induce suppliers to create more apartments (if price increases) or delay construction (if price decreases). 8. Suppose the government regulates the prices of beef and chicken and sets them below their market-clearing levels. Explain why shortages of these goods will develop and what factors will determine the sizes of the shortages. What will happen to the price of pork? Explain briefly. If the price of a commodity is set below its market-clearing level, the quantity that firms are willing to supply is less than the quantity that consumers wish to purchase. The extent of the excess demand implied by this response will depend on the relative elasticities of demand and supply. For instance, if both supply and demand are elastic, the shortage is larger than if both are inelastic. Factors such as the willingness of consumers to eat less meat and the ability of farmers to change the size of their herds and hence produce less will determine these elasticities and influence the size of excess demand. Customers whose demands are not met will attempt to purchase substitutes, thus increasing the demand for substitutes and raising their prices. If the prices of beef and chicken are set below market-clearing levels, the price of pork will rise, assuming that pork is a substitute for beef and chicken. 9. The city council of a small college town decides to regulate rents in order to reduce student living expenses. Suppose the average annual market -clearing rent for a two-bedroom apartment had been $700 per month, and rents are expected to increase to $900 within a year. The city council limits rents to their current $700 per month level. a. Draw a supply and demand graph to illustrate what will happen to the rental price of an apartment after the imposition of rent controls. The rental price will stay at the old equilibrium level of $700 per month. The expected increase to $900 per month may have been caused by an increase in demand. Given this is true, the price of $700 will be below the new equilibrium and there will be a shortage of apartments. b. Do you think this policy will benefit all students? Why or why not. It will benefit those students who get an apartment, though these students may also find that the costs of searching for an apartment are higher given the shortage of apartments. Those students who do not get an apartment may face higher costs as a result of having to live outside of the college