Econ 102 Homework Assignment # 2
From Miller, Benjamin and North (MBN)
1. Ch. 10, Discussion Questions 1 & 2:
a. #10.2: What determines the size of key-money payments that landlords
demand and tenants offer for the right to rent-controlled apartments?
(Hint: if the rent-controlled price is set below the “normal” market
clearing (equilibrium) price, how would the number of apartments
supplied equal the amount demanded at the rent controlled price? What
would renters be willing to pay for the amount supplied at the rentcontrolled price?)
b. #10.3: Who wins/loses from rent-control? Use a supply and demand
analysis to show a) deadweight losses, b) transfer from either (or both)
consumer or producer surplus to landlords (producers) or renters
(consumers).
2. Ch. 15: Discussion Question 1
a. In the 1970’s Americans had to line up and wait to get gas. Today … we
rarely have to wait. In the 1970’s OPEC raised the price of oil, which
increased the price of gasoline and at the same time the US government
limited how much gasoline retailers could raise the price for gasoline. Use
a demand and supply graph to show a) how the increase in oil prices raised
the price of gasoline and b) how the government’s restrictions on passing
through price increases resulted in long lines for gasoline in the 70’s.