Feet. Note that this equation gives the height up to the demand curve at any H . The fl ow supply curve for housing is given by p = Δ H + 2, where Δ H is the change in the stock. Again, this equation gives the height up to the fl ow supply curve at any value of Δ H . Note that the slopes of the two curves are – 1 and 1, respectively, a fact that allows simple answers to be derived below. (a) Compute the equilibrium price p e (the price at which Δ H = 0). (b) Suppose that prior to the demand shock, the housing market is in equilibrium, with a stock of size H = 1. Verify that the price in the market equals p e when the stock is this size. After the demand shock (e. g., arrival of the Cuban refugees), demand increases to p = 8 – H . (c) With the new higher demand, the price in the market shoots up to a higher value, denoted by p '. Compute p '. (d) Next, compute the change in the housing stock that occurs as developers respond to this new price (compute Δ H ). Then, compute the new size for the housing stock, which equals the original stock plus Δ H . (e) Compute the price that prevails in the market after this increase in the housing stock. Is further adjustment of the stock required to reach equilibrium? How many periods does it take for the market to reach the new equilibrium? Instead of following the sequence you have just analyzed, now suppose that rent control is imposed immediately after the demand shock, with the controlled price set at p c = 3.