You Own an Apartment Complex, and You Want to Increase

question 104

Multiple Choice

You own an apartment complex, and you want to increase the monthly rent on all units by $50 a month. When you ask the building's on-site manager, Janette, whether she thinks it's okay to raise the rent, she says that demand for rental housing is elastic. What is she saying you should do?

• A) People are sensitive to price changes on big-ticket items such as housing, so you should be prepared for a drop in demand if you raise the rent.
• B) People are more tolerant of price changes on big-ticket items such as housing, so it's okay to raise the rent. You won't see a change in demand.
• C) People won't be able to find a close substitute to your apartments, so they'll have to absorb the price increase when you implement it.
• D) Housing is perceived as a necessity, so a change in price will have relatively little effect on demand. Raising the rent will have no repercussions.

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Definitions:

Customers

Individuals or businesses that purchase goods or services provided by a company or a store.

Market Forces

The supply and demand mechanisms that determine the price and quantity of goods and services in a free market.

Equilibrium Wage

The payment rate at which the labor needed by businesses equals the labor provided by individuals.

Biased Tutoring Centers

Educational establishments that might offer preferential treatment or skewed perspectives based on certain biases, potentially affecting the quality or fairness of tutoring received.