What are the positive
and negative economic effects of rent control?
Question 4 — Rent Control (40 points) Let the demand and supply functions for one-bedroom rental housing in San Francisco be given
by QD = 449,000 — 200R , and Q3 = -1000 + 100R, where R is the monthly rent of a one-
bedroom apartment. 3) (10) What is the equilibrium rent, R*, and quantity of housing on the market, Q*? Graph
your answer, showing the equilibrium P, Q*. h) (10) What happens in the market when we institute rent control: rents are capped at IT = $1000 per month. What is Q3? Is there a shortage or a surplus as a result?
Illustrate on your graph above. c) (10) What is the change in consumer surplus, producer surplus and social welfare from
the price ceiling? d) (10) What are the positive and negative economic effects of rent control? Microeconomics