4. According to a report in rentcom, rents for one- and two-bedroom apartments in the US have increased more than 20% since last year and are now at record highs. One report states that 40% of counties in the U.S. are now considered "unaffordable" for renters. Suppose that we try to make housing more affordable by providing a subsidy to producers of rental housing (landlords). A subsidy means that the government will pay part of the producers' costs of producing apartments and other rental housing. Use supply-and-demand analysis to explain the effect of this subsidy to producers on the equilibrium price and equilibnum quantity of apartments and other rental housing. Your answer should identify what (if anything) shifts and why, and then an explanation in the proper sequence of what happens as a result, and why it happens. The conclusion to your answer should be a statement of whether the subsidy would make apartments more affordable for consumers. This question focuses on subsidies to producers (landlords) your answer should address subsidies to producers and only subsidies to producers. Other approaches are considered separately in their own questions.

Q&A Education