Yesterday's Memphis Flyer caught my eye with a cover story about homelessness, and it reminded me of a discussion I had in December with a group of real estate investors and landlords. I then wrote the following econ 101 homework assignment:

This problem will also resemble a problem that might appear on the exam (sans the reading assignment).

Read the article “No Place Like Home,” which is the cover story in the 1/29/09-2/4/09 issue of the Memphis Flyer. If you are still looking for an idea for paper #1, this would be a viable candidate.

1. Use the principles we discussed in class on Thursday, 1/29 and Tuesday, 2/3 to formulate a hypothesis that might explain why the quantity of housing demanded exceeds the quantity of housing supplied (3 points).

2. Is the elasticity of the housing supply curve likely to be greater in the short run or in the long run? Explain your answer using an appropriate diagram (3 points).

3. In a meeting on December 16, 2008, the Memphis City Council considered an “Ordinance to Provide for Minimum Energy Efficiency in Rental Property.”* The ordinance would require landlords to make improvements that would increase the energy efficiency of their properties in Memphis. Using a supply and demand diagram, predict how this ordinance would affect the equilibrium price and quantity of housing in Memphis. Explain your answer using the “Ten Key Elements of Economics” and the principles you learned in our discussion of the laws of supply and demand (3 points).

4. Suppose a classmate argues that the housing supply will not change because landlords can still earn profits. In light of the principle that people make decisions at the margin, is this correct or incorrect (1 point)?

*Audio of the City Council discussion can be found at http://memphis.granicus.com/MediaPlayer.php?view_id=2&clip_id=1097; you can select the option to “Jump To…” the discussion of the ordinance, which is the last item discussed. I had trouble with the “Jump To…” option with Firefox, but it works with Internet Explorer. Disclosure: I first learned of this ordinance when I gave a talk to the Memphis Investors Group, which is comprised of local real estate investors and landlords.