Course Solutions Uncategorized (Solved) : 2 Assume Parameter Values Model Housing Tenure Choice Follows I003 Mortgage Interest Rate Q33063729 . . . .

(Solved) : 2 Assume Parameter Values Model Housing Tenure Choice Follows I003 Mortgage Interest Rate Q33063729 . . . .

 

2. Assume that the parameter values in the model of housing tenure choice are as follows: i0.03 (mortgage interest rate), h-0.02 (property tax rate). d= 0.02 (depreciation rate), g0.04 (housing appreciation rate), e- 0.02 (rate of excess depreciation), λ-0.35 (landlords tax rate). a) Using this information, compute t, the critical consumer income- tax rate that separates renters and owner-occupiers. Note that in this computation, you are finding the intersection point of the flat rent line and the downward-sloping line corresponding to the owner-occupiers cost. b) Suppose λ increases to 0.40, and compute the new t. How do the relative 

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