If the government gives a 100 subsity to renters to help with apartment cost....?

Question

What way will this shift the demand curve? WIll this increase demand for apartments or decrease?

Answer 1

It the government gave it to all renters nothing would happen because it would just lead to inflation and the equilibrium point wouldn't end up changing. Initally the demand curve would shift down and to the right because price would fall therefore demand would increase. Soon after the prices would rise and as I stated you'd be back at zero.

If they only subsidized the poor then the apartments would likely increase in price on the lower end and decrease value for the tenants while the higher priced apartments would remain out of reach. It's an interesting question to say the least.

Answer 2

Actually, with a 100% subsidy, this would make the demand curve vertical at whatever the quantity is on the curve when the price is 0. For all scenarios of price and quantity (except when price actually is zero, which is never), this subsidy increases the quantity demanded. "Demand" does not technically increase, it changes to become a vertical "curve."

Answer 3

This will shift the demand curve up. Since we are dealing with a supply/demand curve, the new intersection would be at a point up and to the right of the pre-subsidy one (i.e. increased price and increased rentals).
All of the above assumes a standard (upward sloping) supply curve. The supply curve may be limited by external factors (i.e. building regulations), and in the short term it may not be possible to increase the number of available units...those complexities are far past Econ.101 though.

Answer 4

Increases demand because the price becomes, effectively, zero.