Suppose that, prior to the passage of the Truth in Lending Simplification Act and Regulation Z, the demand for consumer loans was given by Qdpre-TILSA = 10 – 80 P (in billions of dollars) and the supply of consumer loans by credit unions and other lending institutions was QSpre-TILSA = 4 + 80 P(in billions of dollars). The TILSA now requires lenders to provide consumers with complete information about the rights and responsibilities of entering into a lending relationship with the institution, and as a result, the demand for loans increased to Qdpost-TILSA = 20 + 80 (in billions of dollars). However, the TILSA also imposed “compliance costs” on lending institutions, and this reduced the supply of consumer loans to QSpre-TILSA = 2 + 80P (in billions of dollars). Based on this information, compare the equilibrium price and quantity of consumer loans before and after the Truth in Lending Simplification Act.
