Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 14

The rent control agency of Rochester has found that aggregate demand is P = 500 - 5 Q D. Quantity, Q D , is measured in thousands of apartments. Price, P , equals the monthly rental rate in dollars. The city's board of realtors acknowledges that this is a good demand estimate and has shown that supply can be expressed as P = 5 Q S.
a. If the agency and the board are right about demand and supply, respectively, what is the free-market price How many apartments are rented
b. If we assume an average of 3 persons per apartment, what is the expected change in city population if the agency sets a maximum average monthly rent of $100 and all those who cannot find an apartment leave the city