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Consider the effects of housing subsidies on the ?ltering process. As before, assume that each household tolerates up to a 10-unit mismatch between its ideal and the actual quality of housing. All new housing is built for high-income households. Upgrading housing to a higher quality level is prohibitively ex- pensive. Use Figure 14–5 as a starting point, with points l , m , and h . Suppose a subsidy program pays 20 percent of the housing expenses of middle-income households. The price elasticity of demand for housing is 1.0. a. For middle-income households, the ideal quality of housing services in- creases from _____ to _____ . A middle-income household will reach a 10-unit mismatch after _____ years. At that time, a high-income household has a mismatch of _____ . b. To induce the high-income household to move, the price of 24-unit housing [increases, decreases]. c. To induce a low-income household to buy the 14-unit dwellings vacated by middle-income households, the price of 14-unit dwellings [increases, decreases]. d. Draw a graph like Figure 14–6 to show the long-run effects of the subsidy program on the housing stepladder.
Chapter 14, Problem 7(choose chapter or problem)
Subsidies for Middle-Income Households
Consider the effects of housing subsidies on the filtering process. As before, assume that each household tolerates up to a 10-unit mismatch between its ideal and the actual quality of housing. All new housing is built for high-income households. Upgrading housing to a higher quality level is prohibitively expensive. Use Figure 14–5 as a starting point, with points l, m, and h. Suppose a subsidy program pays 20 percent of the housing expenses of middle-income households. The price elasticity of demand for housing is 1.0.
(a). For middle-income households, the ideal quality of housing services increases from ____ to ____. A middle-income household will reach a 10-unit mismatch after _____ years. At that time, a high-income household has a mismatch of _____.
(b). To induce the high-income household to move, the price of 24-unit housing [increases, decreases].
(c). To induce a low-income household to buy the 14-unit dwellings vacated by middle-income households, the price of 14-unit dwellings [increases, decreases].
(d). Draw a graph like Figure 14–6 to show the long-run effects of the subsidy program on the housing stepladder.
Questions & Answers
QUESTION:
Subsidies for Middle-Income Households
Consider the effects of housing subsidies on the filtering process. As before, assume that each household tolerates up to a 10-unit mismatch between its ideal and the actual quality of housing. All new housing is built for high-income households. Upgrading housing to a higher quality level is prohibitively expensive. Use Figure 14–5 as a starting point, with points l, m, and h. Suppose a subsidy program pays 20 percent of the housing expenses of middle-income households. The price elasticity of demand for housing is 1.0.
(a). For middle-income households, the ideal quality of housing services increases from ____ to ____. A middle-income household will reach a 10-unit mismatch after _____ years. At that time, a high-income household has a mismatch of _____.
(b). To induce the high-income household to move, the price of 24-unit housing [increases, decreases].
(c). To induce a low-income household to buy the 14-unit dwellings vacated by middle-income households, the price of 14-unit dwellings [increases, decreases].
(d). Draw a graph like Figure 14–6 to show the long-run effects of the subsidy program on the housing stepladder.
ANSWER:Step 1 of 6
Assuming that each household tolerates up to a 10-unit mismatch between its ideal and the actual quality of housing, all new housing is built for high-income households.