Microeconomics Project

Microeconomics project:

Introduction:

Rent of apartments differs with the location of the apartments, the size, the number of rooms, distance form town, environment and whether an apartment is furnished or not, the rent price will increase as the number of rooms increase, the rent will also be high if the house is furnished and also if its close to a town. We will consider ten rent rates in Michigan, Bloomfield hills area.

Name

Location

Price

colonial court terrace

Birmingham

$1395

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chimney hill apartment

west bloom field

$1015

Bloomfield

on the fields

west

Bloomfield

$800

Huntley square apartment

Birmingham

$1225

Aldingbroke terrace and home town

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west bloom field

$2375

Bloomfield

place apartment

Bloomfield

hills

$735

Arbor of west Bloomfield

west

Bloomfield

$1695

Brandy wine apartment

west

Bloomfield

$2495

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Thornberry apartment

west

Bloomfield

$1145

Eton

squire apartment

Birmingham

$1295

total

$14175

mean

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$1417.5

[1]

We will discuss the factors that influence the rent rates of apartments one after the other starting from the distance from town, number of rooms and furnishing. From the above data the Brandywine apartments rent rates is much higher than any other apartment, the rent rate is double the average rate of the apartments which is $1417, the other notable observation is that the Bloomfield on the green apartment and the Bloomfield on the field apartment have the lowest rent rate and they are half the average rent rate of all the apartments.

The distance from town:

The distance from town is one factor that highly influences the rent rates of apartments, the further the apartment is from town then we will expect that the lower the rates compared to those apartments which are very near the town which will have high rent rates.

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From our above ten sample of apartments it is evident that the distance from town does influence the rent rates, the colonial court terrace from our sample is located within walking distance from Birmingham town, its rent rate is $1395, however this can be compared to the Bloomfield on the fields apartment which is far from Birmingham town and its rent rate is $ 800.

From the above results the Colonial court terrace apartments have a rent of $1395 while the Bloomfield on the field apartment rate is $ 800; this makes a large marginal difference which is caused by their distance from Birmingham town, the difference in rent rate is $ 595 which can be associated with the distance from town, therefore the less the distance an apartment is from town the higher is their rent rate. [2]

Number of rooms:

The number of rooms is also a factor that influences the rent rates of an apartment, the more the number of rooms where an apartment may contain a 3 bedrooms and other rooms will definitely affect the rates, the more the number the number of rooms the higher the rent rate.

From our sample we will consider the Brandywine apartments, these apartments are highly luxurious and their rent rate is $ 2495, compared to the Bloomfield on the green apartments whose rent rate is $ 800, the Brandywine apartments have more rooms than the Bloomfield

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on the green therefore the

Brandywine

apartments have a much higher rent rate compared to the other apartments.

The high difference in the rent rate between the Brandywine apartment and the Bloomfield on the green is associated can be associated to the number of rooms that both apartment have, the Brandywine apartments have more rooms and therefore as a result they have higher rent rates as compared to other apartments, therefore the number of rooms an apartment contains the higher is the rent rate. [3]

Furnishing and other amenities:

Under furnishing we will compare an apartment that is not furnished and one that is furnished,

the Thorn berry apartment is furnished and the rent rate is $1145, compared to the Bloomfield

place apartment which is not furnished with a rate of $735, this makes the Thornberry apartment

have a rent rate that is double the rate of

Bloomfield

place apartment.

Therefore furnishing is a factor that influence the rent rates of apartments, if an apartment is

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furnished then the rent rate tends to be higher than the rent rate of other apartments that are not furnished.

Environment:

The type of environment depicted by the quality of neighborhood also affects the rent rate of apartments, the safety issue is also a factor that influence the rent rate, there are apartments located in areas where residents are high income earners and therefore the rent rate is very high, also the high rent rate in this areas can be associated with the high security levels in these areas.

From our sample above the Brandy wine apartments are luxurious houses and they are resided by high income earners, the security levels in these apartments will be higher than the other apartments in other areas.

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Renting an apartment:

If I was to rent an apartment I would first consider the price, if the price of renting a house is too high then I would consider the apartment as the best option, however I would not also consider renting an apartment that has a very low rent rate because this means that the apartment is either far from town, not furnished or has less rooms.

I would therefore consider the rent rate first, then I would consider the size or number of rooms, the number of rooms will depend on the size of the family, or if am single, if the size of the family is large then I would have to rent an apartment that has enough rooms.

However the best apartment I would choose is the colonial court terrace whose rent rate is $ 1395, the reason why I would rent this apartment is because it is within walking distance from town, also the rent rate is lower than the average rent rate of $ 1417 and therefore the rent rate is $ 22 lower than the average rent rate of the ten apartments.

The impact of government rent control policy:

If the government imposes a rent control policy which will lender the apartment rates to be lower than the current rates, this will lead to an increase in demand for houses that currently have

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higher rates, the low rates will increase demand because more and more people will find the rates affordable to rent, the low rent houses will no longer have high levels of demand as people will move to better and more comfortable apartments. [4]

The impact of the rent control policy on the free market of the apartments will be negative, tenants and stakeholders will loose because the policies will create a rent ceiling of these rates, however the entire population will benefit because they will now afford to live in better apartments at lower rent rates, the populations standards of living therefore will rise.

Price

Quantity

Demand

Supply

Q0                Q1

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P0

P1

The government rent control policy will        lower the rent rates and this will cause a shift in the current

Conclusion:

The above analysis of rent houses depicts that factors like distance from town, environment, number of rooms, furnishing and other amenities available in various apartment will influence the rent rate of these apartments, the most suitable apartment is that which has a low rent rate, near a town, furnished and good environment, these factors that make the most suitable apartment create demand which over runs the supply of these apartments therefore the owners will simply increase the apartment rates due to the high demand and therefore earn more.

A government rent control policy will have a major impact on the rent rates, if the government provides a rent ceiling then this will lower the rates creating demand for the currently expensive houses because they will become affordable, however these rent control policy will affect the current free market of the apartments in a negative way but at the same time it will raise the standards of living of the entire population

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References:

Renting an apartment at apartments.com (2007) retrieved on 4th April available at www.apart ments.com

Stratton (1999) Economics: A New Introduction, McGraw Hill Publishers, New  York

[1] www.apartments.com   

[2] www.apartments.com

[3] www.apartments.com

[4] Stratton (1999)

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