What is the equilibrium price of a good or service? What will ...

[aabwk4]

What is the equilibrium price of a good or service?
 
  What will be an ideal response?

Question 2

Suppose the government in a certain country wants to reduce urban sprawl.
 
  What measures could it take to ensure that people choose to live closer to the central business district? (Urban sprawl refers to the development of residential and commercial areas in the suburbs around the periphery of a city. One of the main problems with urban sprawl is that it leads to increased traffic congestion and air pollution as commuters travel to the city every day.)

[nguyenhoanhat]

Answer to Question 1

The equilibrium price is the price at which the quantity demanded by the buyers is equal to the quantity supplied by the sellers.

Answer to Question 2

The government could try to influence an individual's choice of where to live by changing the direct and indirect costs of living in the city and in the suburbs. The direct costs include the rental price of housing and the cost of commuting. The indirect cost includes the opportunity cost of the time that is spent commuting. If the government wants more people to live in the city, it needs to increase the costs of living away from the city and/or reduce the costs of living in the city. Some of the ways in which this can be done are listed below:
i. If taxes are imposed on traffic that is moving in and out of the city, the costs of commuting will increase. People may instead look for apartments within the city.
ii. A change in land use regulations may allow more apartments to be built in the city, lowering the rental price of apartments. This will enable more people to choose to move to the city.
iii. An increase in property taxes on houses in the suburbs will increase the cost of living outside the city leading individuals to look for housing within the city.

[aabwk4]

Thank you

[nguyenhoanhat]

Happy to help you