Please scan or take a photo of your answers and upload the f…

Please scan or take a photo of your answers and upload the file here. Feel free to use the link for the next question to upload an extra file if you have more than one page. The Four-Quadrant Model. (a) (10 pts) Please set up a diagram of the DiPasquale and Wheaton Four-Quadrant Model, carefully labeling each quadrant. Describe the equilibrium conditions for each of the four quadrants. (b) (20 pts) The Covid-19 pandemic caused a credit crunch and increased borrowing costs. As a result, the investors in the real estate asset market have to increase the required CAP rate in response to the unexpected pandemic risk. For simplicity, let’s ignore the shocks to the demand in the space market and construction costs in the construction industry. In other words, assume that the demand curve in the space market and the supply curve in the construction industry are not shifted. Let’s further assume that the depreciation rate for space market stock adjustment remains unchanged. Please use the DiPasquale and Wheaton Four-Quadrant diagram to describe the short-run market response and the long-run equilibrium resulting from the increase of the market cap rate.