With a rent ceiling of $2,000, the quantity supplied will be + (1,300 × 2,000) = −1,000,000 1,600,000. The willingness to pay can be from the demand equation: 1,600,000 = 4,750,000 1,000P, so 1,000P = 3,150,000 and = $3,150. P – Following Figure 4A.2 (page 133), consumer surplus under rent control equals its value in competitive equilibrium plus the value of area minus the value of area producer surplus A B, equals and deadweight loss equals D, B + C. Area = ($2,500 $2,000) × 1,600,000 = $800,000,000 A − Area = ½ × ($3,150 2,500) × (2,250,000 1,600,000) = $211,250,000, so B – − Consumer surplus = ($2,531,250,000 + $800,000,000) $211,250,000 = $3,120,000,000 − Deadweight loss equals Area + = $211,250,000 + 0.5 × ($2,500 - $2,000) × (2,250,000 B C – 1,600,000) = $373,750,000. Producer surplus equals Area = 0.5 × ($2,000 $769) × 1,600,000 = $984,800,000. D −
With a rent ceiling of $2,000, the quantity supplied will be −1,000,000 + (1,300 × 2,000) = 1,600,000. The willingness to pay can be from the demand equation: 1,600,000 = 4,750,000 – 1,000P, so 1,000P = 3,150,000 and P = $3,150. Following Figure 4A.2 (page 133), consumer surplus under rent control equals its value in competitive equilibrium plus the value of area A minus the value of area B, producer surplus equals D, and deadweight loss equals B + C. Area A = ($2,500 − $2,000) × 1,600,000 = $800,000,000 Area B = ½ × ($3,150 – 2,500) × (2,250,000 − 1,600,000) = $211,250,000, so Consumer surplus = ($2,531,250,000 + $800,000,000) − $211,250,000 = $3,120,000,000 Deadweight loss equals Area B + C = $211,250,000 + 0.5 × ($2,500 - $2,000) × (2,250,000 – 1,600,000) = $373,750,000. Producer surplus equals Area D = 0.5 × ($2,000 − $769) × 1,600,000 = $984,800,000.