(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)
(Speaker)
In part B, you were asked to analyze the effects of an income supplement opposed to a price ceiling.
(Description)
The following text is briefly written on the slide:
Suppose it is decided that rent control in New York City will be abolished and that market rents will now prevail. Assume that all rental units are identical and so are offered at the same rent. To address the plight of residents who may be unable to pay the market rent, an income supplement will be paid to all low income households equal to the difference between the old controlled rent and the new market rent.
b. What effect will an income supplement policy have on the market? What effect does it have on the market rent and quantity of rental housing supplied in comparison to your answers to part a?
(Speaker)
We are going to start with the demand and supply graph from before.
(Description)
The horizontal axis and the vertical axis are drawn. The horizontal axis is labeled as Quantity of Rental Units, no units are given. The vertical axis is labeled as Rental Price, no units are given.
A straight line sloping downward from the left upper corner to the right lower corner of the plot is drawn. It is labeled as Demand.
Another straight line sloping upwards from the left lower corner to the right upper corner of the plot is drawn. It is labeled as Supply.
The lines Demand and Supply intersect at the point with coordinates, Q and P.
(Speaker)
Remember that a price ceiling resulted in a decrease in quantity and quality. Providing low-income households with an income supplement will cause the demand line to shift rightward.
(Description)
The Demand line shifts rightwards while retaining the same slope. This new line is labeled as Demand (Income Supplement).
(Speaker)
The low-income households can now afford to purchase rental units at all price levels. The income supplement will cause both the equilibrium rental price and quantity to increase.
(Description)
The Demand (Income Supplement) line intersects with the Supply line at the point with coordinates, Q subscript 2 and P subscript 2, so that, Q subscript 2, is greater than, Q, and, P subscript 2, is greater than, P.