Really great job. Thank you so much. I really love it. Thank you so much for all of your help.
Assume that the parameter values in the model of housing tenure
choice are as follows:
i = 0.03 (mortgage interest rate),
h = 0.02 (property tax rate),
d = 0.02 (depreciation rate),
g = 0.04 (housing appreciation rate),
e = 0.02 (rate of excess depreciation),
λ = 0.35 (landlord ’ s tax rate).
( a) Using this information, compute τˆ, the critical consumer incometax
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-occupier ’ s
(b) Suppose λ increases to 0.40, and compute the new τˆ . How do the
relative sizes of the renter and owner groups change? Give an intuitive
explanation for your answer, and illustrate your answer in a diagram.
(c) Suppose λ is back at 0.35 but that h increases to 0.03, and compute
the new τ ˆ . How do the relative sizes of the renter and owner groups
change? Give an intuitive explanation for your answer, and illustrate
it in a diagram (note that this diagram isn ’ t as simple as that in (b)).
Please give me the detail of every step. thank you
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