Question

In many​ cities, firms that own office buildings can renovate them for use as residential apartments. According to a news​ story, in many cities​ "residential rents are surpassing office​ rents." ​Source: Eliot​ Brown, "Developers Turn Former Office Buildings Into​ High-End Apartments," Wall Street Journal​, May​ 7, 2014. The response to an increase in residential rents would be ________.

Answer 1

A decrease in the supply of office space, shifting supply to the left.

Step-by-step explanation:

A decrease in supply can take place as shift to the left or upwards in a supply curve. In this case, a left shift indicates that, in the time that the supply of office space decreases, firms that own office buildings produce and sell a smaller amount at every price. The upward shift shows that supply usually decreases when the production costs increase, so producers must set a higher price than in the past to supply an established quantity of output.