The Cities of Francistown and Nalady Are Five Miles Apart

Essay

The cities of Francistown and Nalady are five miles apart. Francistown enacts a rent control
law that puts a ceiling on rents well below their equilibrium market value. Predict the impact of this law on the competitive equilibrium rent in Nalady, which does not have a rent control law.
a. Illustrate your answer with one demand and supply graph for the apartment market in Francistown and another demand and supply graph for the apartment marketing Nalady.
b. Make sure that your graphs clearly show (1) the initial equilibrium before the rent control in both markets and (2) what happens after the imposition of rent control.
c. Clearly show any shifts in the demand or supply curves, and the movement along the curves for each market.
d. Label your graphs fully and provide written explanation for your graphs.