The equilibrium rent in a town is $500 per month and the equilibrium number of apartments is 100. The city now passes a rent control law that sets the maximum rent at $400. The diagram below summarizes the supply and demand for apartments in this city.

a. Use the figure to complete the table below

b. Use your answers to part (a) of this problem to answer the following questions:
i. Did consumer surplus definitely rise, definitely remain constant, definitely fall, or is the direction of the change in consumer surplus unclear?
ii. Did producer surplus definitely rise, definitely remain constant, definitely fall, or is the direction of the change in producer surplus unclear?
iii. Did social surplus definitely rise, definitely remain constant, definitely fall, or is the direction of the change in social surplus unclear?

Transcribed Image Text:

500 IV 400 VI 60 100 Quantity Before Rent Control After Rent Control Change Consumer Surplus Producer Surplus Social Surplus