Question

The rent collected on a 9 Unit building is as follows: Three apartments, $550; three apartments, $600; three apartments, $650. There is a vacancy rate of of 4%, additional income of $2,400, and annual expenses of $5,000. With a cap rate of 9%, how much should the buyer pay for this property?

A. $661,244
B. $717,866
C. $698,534
D. $773,422

Answer 1

To calculate the price elasticity of supply and determine the percentage increase in apartment supply, use the formula: Percentage Increase in Quantity Supplied = (New Quantity Supplied - Original Quantity Supplied) / Original Quantity Supplied * 100. However, the question does not provide information on the percentage increase in price, so we cannot determine the actual value of price sensitivity.

Step-by-step explanation:

To calculate the price elasticity of supply and determine the percentage increase in apartment supply, we can use the formula:

Percentage Increase in Quantity Supplied = (New Quantity Supplied - Original Quantity Supplied) / Original Quantity Supplied * 100

Using the information provided, the original quantity supplied is 10,000 units and the new quantity supplied is 13,000 units. Plugging these values into the formula:

Percentage Increase in Quantity Supplied = (13,000 - 10,000) / 10,000 * 100 = 30%

The price sensitivity, or price elasticity of supply, can be calculated using the formula:

Price Sensitivity = Percentage Increase in Quantity Supplied / Percentage Increase in Price

As the question does not provide information on the percentage increase in price, we cannot determine the actual value of price sensitivity.